Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — EMPLOYMENT

GCHQ Cheltenham

Mr. Dalyell: asked the Secretary of State for Employment what recent discussions he has had with the International Labour Organisation about the withdrawal of trade union rights at Government Communications Headquarters.

The Secretary of State for Employment (Mr. Tom King): The International Labour Organisation has written in connection with the report on GCHQ by the Committee on Freedom of Association. The Government will be responding to this report within the next few weeks.

Mr. Dalyell: Can the Secretary of State explain to the ILO why, if there was a real, serious threat to national security, the Government took no action for three long years after the events of which they complain? How could competent Ministers allow themselves to be involved in such dereliction of duty?

Mr. King: I see that the hon. Gentleman recognises that there is a case for taking action because of the deliberate campaign to damage defence readiness, which was part of the Civil Service dispute. I believe that the time scale shows the lengths to which the Government went to see whether alternative routes were available.

Mr. Budgen: When the Government said at the beginning of the dispute that they would be bound by the domestic legal process, did they mean that they would not accept the jurisdiction of the European Court of Human Rights in this matter?

Mr. King: The question of being bound by the domestic legal process had relevance to the request from the trade unions for a stay of any further action with regard to the employees affected at GCHQ.

Mr. Wrigglesworth: Will the Secretary of State therefore give an assurance that national security will not be used as a pretext for banning trade unions in other Government Departments?

Mr. King: I think that that assurance has been given very clearly indeed throughout the main generality of the Civil Service. The hon. Gentleman will be aware of the specific provision of convention 151, that
employees whose duties are of a highly confidential nature should be determined by national laws and regulations.

Mr. Bill Walker: When my right hon. Friend meets bodies, such as the ILO, will he point out that GCHQ is

unique in that a vital part of its work is carried out within our intelligence framework, that the individuals working there understand and have always understood that and that that is why they never took action in the past? Is he aware that when I represented them 20 years ago they would not even have considered such action?

Mr. King: Yes, but the Opposition never seem to accept that. They fail to recognise that it was the boast of the Civil Service unions during the campaign, to quote an actual campaign document, that
The use of selective strike action by members in sensitive areas is a key part of our campaign. Our ultimate success depends upon the extent to which … defence readiness is hampered.

Mr. Prescott: Is the Secretary of State aware that ballots can still take place at GCHQ, that in a recent ballot an individual was elected by 89 per cent. of the participants to represent them in pay negotiations, that that is a far greater proportion than the 85 per cent. required for a closed shop, but that the individual has nevertheless been forced to resign? Does the right hon. Gentleman intend to continue to encourage management to conduct ballots until it finds someone acceptable to it and to the Secretary of State?

Mr. King: The internal affairs of GCHQ are a matter for my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs. I suspect, however, that it would be interesting to know exactly who were the participants in that ballot.

Mr. Dalyell: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

Adult Training

Mr. Tom Cox: asked the Secretary of State for Employment what is the number of adult job retraining places within the Greater London council area.

The Minister of State, Department of Employment (Mr. Peter Morrison): We plan to train approaching 12,000 people this year in Greater London through the training opportunities scheme. In 1985–86 we expect to support nearly 17,000 adult training places in Greater London.

Mr. Cox: Is the Minister aware that the reply that I recently received from his Department made it clear that there are well over 65,000 men and women over the age of 50 who are unemployed in London? As many of them still have commitments — their children may he at school, or they may be buying their house—they have little hope of taking up a place on an adult retraining scheme. At this Christmas season, what message of hope can the Minister offer to those people? In particular, what can he tell them about their future employment prospects?

Mr. Morrison: I am aware of what the hon. Gentleman says about unemployment in Greater London. However, the numbers to be trained next year will substantially increase because of the rejigging of the adult training strategy. Some £75 million will be spent through the Manpower Services Commission on training and retraining in London.

Dr. Twinn: How many training places are provided in Greater London through the Greater London Training Board, as opposed to the Manpower Services Commission?

Mr. Morrison: The Greater London Training Board, by way of topping up the work of the MSC, has spent £7 million this year, compared with expenditure of £75 million by the MSC.

Industrial Relations

Mr. Knox: asked the Secretary of State for Employment if he will meet the Confederation of British Industry to discuss the long-term improvement of industrial relations.

The Parliamentary Under-Secretary of State for Employment (Mr. Peter Bottomley): The long-term improvement of industrial relations is an important topic of discussion in our frequent contacts with representatives of the CBI.

Mr. Knox: Does my hon. Friend agree that greater employee participation has an important part to play in the long-term improvement of industrial relations, and will he emphasise the importance and urgency of the matter when he next meets the CBI?

Mr. Bottomley: Yes, Sir. Employee involvement and participation and the spread of share ownership help to persuade people to work together for the prosperity of the country and the security of their own jobs.

Mr. James Lamond: How can there be any improvement in industrial relations when the Government spend all their time bashing the trade union movement, legislating against it and trying to destroy it? How can such a Government turn round and make mealy-mouthed satements about their interest in good industrial relations?

Mr. Bottomley: If the hon. Gentleman believes that spreading democracy within the trade unions amounts to bashing them, he takes a different view from that taken by most people and members of trade unions.

Youth Training Scheme

Mr. Amess: asked the Secretary of State for Employment what are the latest figures for the numbers of people entering the youth training scheme and finding a job immediately in the Manpower Services Commission area serving Basildon; and how these figures compare (a) with the national figures and (b) with the local and national figures one year ago.

Mr. Peter Morrison: An informal survey of managing agents and sponsors in Essex shows that, to the best of their knowledge, more than seven out of 10 youngsters leaving the youth training scheme are going into jobs. A recent national sample survey indicated that almost six out of 10 leavers were in work at the time of the survey.

Mr. Amess: Is my hon. Friend aware that the success rate in Basildon is even higher, and is he encouraged by that fact? Does he agree that the youth training scheme offers excellent training and every prospect of a permanent job at the end of a placement?

Mr. Morrison: I agree that Basildon has done particularly well and that, whatever Opposition Members

may think, the youth training scheme is successful in every possible way. That success is demonstrated particularly clearly by the fact that the youngsters themselves approve of and like it.

Mr. Madden: Will the Minister assure the young people of Basildon, Bradford, and many other places, that he has no proposal to deny them supplementary benefit if, for whatever reason, they refuse a youth training scheme place?

Mr. Morrison: As the hon. Gentleman will be aware, I have seen some of the schemes in Bradford, and they too, are very successful.
In June 1982 my right hon. Friend the Secretary of State for Trade and Industry — then Secretary of State for Employment — in a statement about supplementary benefit, said:
We have therefore decided that withdrawal of supplementary benefit will not take place in September 1983 and that there will be a further review after a year's operation of the scheme."—[Official Report, 21 June 1982; Vol. 26, c. 23.]

Mr. Prescott: Can the Minister confirm that youngsters aged 16 will face a fine of £17·30 a week if they refuse a place on the youth training scheme? Many young people, who see the scheme as cheap labour, prefer to take the advice to get on their bikes and look for jobs. Should not the Minister consider the advice of the Select Committee to use whatever spare places are available to provide such opportunities for the 1 million young people under the age of 25? Is it not strange that a Government who believe in freedom of choice should be recruiting young people into forced labour schemes?

Mr. Morrison: I can confirm that, apparantly unlike the hon. Gentleman and his right hon. and hon. Friends, the Government are working towards unemployment for 16 and 17-year-olds not being an option. I can also confirm that, for 18 to 24-year-olds, my right hon. Friend the Secretary of State announced that of the 130,000 community programme places, 50,000 would have training. More than half of the places on the community programme are occupied by 18 to 24-year-olds.

Young Workers Scheme

Mr. John Townend: asked the Secretary of State for Employment how many young people are employed under the young workers scheme in firms which come under the Distributive Trades Wages Council.

The Parliamentary Under-Secretary of State for Employment (Mr. Alan Clark): The Retail Trade (Non Food) Wages Council has chosen to set a weekly minimum rate of pay for 17-year-olds which, by just 5p, is too high to enable employers in that trade to claim support under the young workers scheme.

Mr. Townend: Does my hon. Friend agree that it is nonsense for the Government to set aside funds to encourage employers to take on young people at realistic rates of pay when wages councils make any employer who takes advantage of that scheme in breach of the regulations? How many young people are on the dole because of this stupidity, and when will the Government act?

Mr. Clark: As my hon. Friend knows, we are examining wages councils. We encourage representations


from all quarters, including his, which, though not unpredictable, is welcome. The fixing of a limit which is so narrowly calculated to frustrate the working of a Government scheme is unlikely to be accidental.

Mr. Nellist: Perhaps for the information of the House and others who are listening the Minister will say how much the wages council rate is in pounds and pence. Will he confirm that when Sir John Hoskyns, who I believe now has something to do with the Institute of Directors, was the head of a policy unit under the Prime Minister, he produced a paper which said that the aim of the young workers scheme and the youth training scheme was to increase the differential between adult rates and young workers' rates — in other words, to create a pool of cheap youth labour?

Mr. Clark: The hon. Gentleman is waxing very indignant about wage rates, but he must decide to which he attaches the greater importance: the wage rates of those who are in work, or to the job prospects of those who are seeking work.

Young Persons

Mr. Ron Davies: asked the Secretary of State for Employment what percentage of young people aged 16 to 24 years, not currently in full-time education, are without full-time, permanent employment at the latest date for which figures are available.

Mr. Peter Bottomley: The labour force survey a year ago showed that the approximate percentages were: 46 in full-time employment, seven in other employment, making 53 in all; 20 in full-time education, three in training and employment schemes, making 23; 10 were not seeking work, including those looking after a home or family; and 13 were unemployed seeking work.

Mr. Davies: I am grateful to the Minister for that reply. Does he understand what a personal tragedy it is for the third of a million young people who have been out of work for more than one year? Does he appreciate that if the Government intend to bully young school leavers on to youth training schemes there will be massive and widespread opposition? Will he give an assurance that he will undertake realistic and widespread consultations with people who are involved in YTS before the Government take a decision? Will he also undertake, in view of the gravity of the Government's proposals, to arrange for a debate on the Floor of the House before such a scheme is implemented?

Mr. Bottomley: The Gentleman will have heard what my hon. Friend the Minister of State has said, and the hon. Gentleman's final question should be addressed to my right hon. Friend the Leader of the House. I can say, however, that it is common ground that we must build up the quality of training, encourage people to take that training and ensure that all school leavers get the best possible opportunities to meet the needs for jobs in the future and to create the prosperity on which our future depends.

Mr. Madel: If there are to be more courses on computer skills and similar subjects in further education, which means local authorities being involved in more expenditure, will the Government take care to ensure that

expenditure which is designed to help young unemployed people will not push local authorities into penalty zones with regard to the rate support grant?

Mr. Bottomley: I hesitate to answer on behalf of my right hon. Friends the Secretaries of State for Education and Science and for the Environment. I believe that my hon. Friend will recognise that much of what he has been pushing for has led to greater attention being paid to technical and vocational education in and out of school.

Mr. Wigley: Yesterday the Prime Minister said that every 16, 17 and 18-year-old had an opportunity lo go into either training or further education. Does the Under-Secretary of State agree that that is not a real option when many young people going into further education receive a grant of only £200 a year, which, in effect, debars them from obtaining that education?

Mr. Bottomley: The hon. Gentleman is encouraging us to do more and to do better. We shall certainly take on board his remarks.

Mr. Maples: Does my hon. Friend agree that one of the best ways of helping to create jobs for the young unemployed and others who are unemployed is to reduce employers' national insurance contributions? That would be a more effective way of helping to create jobs than raising tax thresholds.

Mr. Bottomley: My hon. Friend is right, but we need to recognise that employers take part in wage bargaining, and at present wage rates are rising faster than the growth in output or productivity.

Mr. Ashley: Is the Minister aware that, as many young people are out of work for so long, long-term unemployment is becoming a social cancer? Will the hon. Gentleman ensure that the re-employment of the long-term unemployed is a top Government priority and that the level of long-term unemployment is the main criterion for Government aid?

Mr. Bottomley: There is agreement on both sides of the House that trying to create opportunities for the long-term unemployed, whether young or old, to return to employment is a high priority. I welcome the right hon. Gentleman's support.

Skillcentres

Mr. Sheerman: asked the Secretary of State for Employment what representations he has received recently on the closure of skillcentres.

Mr. Tom King: Since my statement in the House about the skillcentre proposals being made to the Manpower Services Commission by the Skillcentre Training Agency, my colleagues and I have received some 50 letters on the subject.

Mr. Sheerman: Is the Secretary of State aware that throughout the country numerous firms have declared their opposition to the closure of skillcentres, which provide the up-to-date and relevant skills for their industries? I have received letters on this matter from Taylor Woodrow and Lonhro and from the sunrise and sunset industries, if one must use that terminology. Will the right hon. Gentleman instruct the MSC to consult all bodies — not only employers, but trade unions and education authorities— before any of these closures are brought forward?

Mr. King: The hon. Gentleman will be aware that the officials in the MSC and the Skillcentre Training Agency gave evidence to the Select Committee and agreed to defer making any decision at their last meeting on this subject. I understand that the Select Committee will hold a further meeting with the Civil Service unions concerned in this matter. I know that the MSC will be anxious to hear the views of anyone who wishes to comment on these proposals.

Mr. Jessel: Will my right hon. Friend reconsider whether the Twickenham skillcentre, which he visited last year and which he knows does excellent work, can be saved? Failing that, will he ascertain what other openings within easy reach of the area can be offered to staff and trainees?

Mr. King: I know that my hon. Friend was extremely prompt in expressing his interest in the skillcentre in his constituency and that he sent one of the letters that we received on the subject. I know also that he has spoken to my hon. Friend the Minister of State. We shall certainly consider the points that he has made.

Mr. Corbett: How will the proposed closure of the skillcentre at Castle Bromwich help people to acquire the skills they need to obtain a reasonable chance of getting a job?

Mr. King: If the hon. Gentleman has a chance to look at the proposals, he will note that they will establish a wider range of adult training and ensure that we provide more opportunities. The figures for the midlands show that there will be an increase of 157 per cent. in the number of people who will be able to receive adult training under the new proposals. That is on the basis of the proposals made by the Skillcentre Training Agency.

Mr. Stanbrook: Is my right hon. Friend aware that the devil makes work for idle hands, and that all useful training must be beneficial?

Mr. King: The answer to the first part of my hon. Friend's question is yes.
With regard to the second part, we are most anxious to ensure that training provision is relevant and appropriate and covers as many people as possible and that resources are available to give people the best possible chance of getting into jobs.

Youth Training Scheme

Mr. Ashdown: asked the Secretary of State for Employment if he will publish figures showing the number of trainees with special education or special training needs currently training within the youth training scheme; and if he will make a statement.

Mr. Peter Morrison: These figures are not available, as youngsters with special education or special training needs are not separately categorised. However, all youngsters who are eligible for the youth training scheme are offered training designed to meet their individual needs.

Mr. Ashdown: As the Education Act 1981 requires that special educational needs should be met, does the Minister believe that those figures should be kept to ensure that the Act is being followed? Does he realise that in present circumstances the buck is being passed between

the MSC and the local education authority as to who should provide for those needs, in such a way, for instance, that in Yeovil only 2 per cent. of the estimated 20 per cent. are receiving the special education required?

Mr. Morrison: As I said to the hon. Gentleman the other day, if there are cases that he wishes to bring to my attention, I shall look at them. There are a variety of different schemes under modes A and B. They are tailored to help all youngsters, whatever their needs may be.

Mr. Lawler: I am sure my hon. Friend agrees that most young people regard YTS as a worthwhile scheme which will help them to secure permanent employment in the future. What proportion of relevant school leavers this year have gained YTS places, and how many are left to fulfil the pledge that all eligible youngsters will receive a place before Christmas?

Mr. Morrison: On the latter point, I can assure my hon. Friend that we are confident that the Christmas undertaking in respect of minimum age school leavers will be kept. What is gratifying at this stage is that the number of youngsters joining the scheme is substantially up compared with last year. I am most grateful to my hon. Friend for what he does to help the scheme along.

Mr. Eastham: Is it not a fact that mode A is run privately by the employers, who make virtually no provision for handicapped people, while mode B is, in the main, provided by local authorities? The Government cut mode B last year, which will be to the detriment of handicapped students.

Mr. Morrison: I am not sure from what facts and figures the hon. Gentleman is talking. There are a substantial number of disabled youngsters on mode A schemes. On mode B, I am sure that the hon. Gentleman will agree that it is a waste of taxpayers' money to have schemes open but not filled at a cost of £2,000 per approved place. That is not what either of us wants.

Job Sharing Scheme

Mr. Heathcoat-Amory: asked the Secretary of State for Employment what progress he has made in encouraging job sharing and job splitting.

Mr. Alan Clark: My right hon. Friend announced in the debate on the Address that he would be improving two experimental Government initiatives, namely, the job splitting scheme and the part-time job release scheme, designed to encourage changes in working patterns and to help in reducing the problem of unemployment.

Mr. Heathcoat-Amory: Has my hon. Friend considered using reductions in national insurance contributions to encourage job sharing? Does he agree that in larger businesses that would permit more people to be employed, and that the net cost to the Government would be small?

Mr. Clark: As my hon. Friend will be aware, the starting point for national insurance contributions is £34 a week, which means that such contributions are not required for many part-time jobs. We are worried about the legislative burden, including national insurance contributions, on employers which might hinder the creation of new jobs. I shall ensure that my hon. Friend's comments are borne in mind by my right hon. Friend the Chancellor of the Exchequer.

Mr. Golding: Is the Minister aware that only 990 places have been created by the job splitting scheme? Is he further aware that in March 1983 the Government justified spending on 338,000 places by saying that there had been 9,000 inquiries? What has happened to those inquiries?

Mr. Clark: I believe that the hon. Gentleman meant £338,000. He said places.

Mr. Golding: No.

Mr. Clark: I admit that the result of the job splitting scheme has been disappointing, which is why my right hon. Friend announced improvements to it. Naturally, it was appropriate to have an advertising campaign of a limited nature in the first instance, to draw the attention to the scheme of those who might be interested in it.

Mr. Rowe: Is it not an undesirable paradox that at a time when many people are unemployed many of the most prosperous people in society appear to be working longer hours than ever before? Will my hon. Friend consider having discussions with professional bodies and others to see what progress can be made in sharing some of the work among people whose take-home pay is such that it would be easier for them to do so than it would be for people lower down the pay scale?

Mr. Clark: My hon. Friend's suggestion is interesting. Essentially, wage rates and hours of work should be negotiated between employer and employee.

Mr. Evans: Will the Minister concede that, despite the thousands of pounds spent on advertising the job-splitting scheme, it is a dismal failure? Why does he not spend the money more wisely and extend the provisions of the job release scheme to 62-year-olds, among whom there is an obvious demand for this popular scheme?

Mr. Clark: I note the hon. Gentleman's characteristic lack of generosity, which he always displays in relation to this scheme, and I applaud his concern for the public borrowing requirement.

Labour Statistics

Mr. John Fraser: asked the Secretary of State for Employment how many people have been unemployed in Lambeth for more than six months.

Mr. Peter Bottomley: On 11 October, the latest date for which the figures are available, there were 13,162 claimants who had been unemployed for more than six months in the area covered by the Brixton, Stockwell, Streatham and West Norwood jobcentres, which corresponds closely to the London borough of Lambeth.

Mr. Fraser: Does the Minister realise that that is a catastrophic figure and comprises more than half of the unemployed in Lambeth? Is he aware that long-term unemployment is a disease that eats at the heart of that community? Why have the Government chosen this moment to close a skillcentre in Lambeth, to create redundancies by rate capping in three local authorities and to cut the housing programme? Have they taken leave of their senses?

Mr. Bottomley: On 23 November the hon. Gentleman had the opportunity to make his speech and to listen to the

reply from my hon. Friend the Parliamentary Under-Secretary of State for Employment. He will agree that if Lambeth has managed to double its rates per job in the past two years, it is time that rate capping was introduced to give employment in Lambeth, which is rising, a chance.

Mr. Marlow: Why is it that loony Left-wing authorities and high unemployment go together? Which is the chicken and which is the egg?

Mr. Bottomley: My hon. Friend hints at the serious point that if Lambeth and other local authorities in London want more employment they should pay more attention to the needs of employers and those who need jobs, and less to party politics that seem to be paid for by the rates.

Youth Training Scheme

Mr. Roger King: asked the Secretary of State for Employment what improvements he proposes to introduce into the youth training scheme to make it more relevant to today's training needs.

Mr. Peter Morrison: We shall continue our efforts to ensure the youth training scheme provides quality training and responds flexibly to industry's needs.

Mr. King: Does my hon. Friend appreciate that many Conservative Members would welcome a youth training scheme which was extended to all school leavers and was based on an increasing use of apprenticeships?

Mr. Morrison: My hon. Friend will appreciate that we are considering that now. I agree that there should be a flow through from the scheme into apprenticeships based on standards and not on time-serving.

Mr. Penhaligon: Does the Minister agree that if the YTS is to develop into the fully grown plant, as Conservative Members frequently describe it, it must be seen to be attractive and relevant to our young people, and not as a punishment for failing to find a job, which will happen if attendance is made compulsory?

Mr. Morrison: I agree with the hon. Gentleman. I have seen schemes in his constituency which are attractive and relevant. In my opinion Cornwall does particularly well. Regarding his other point, he has already heard what I have to say.

Mr. Alexander: Does my hon. Friend recollect that in the early days the YTS was ridiculed by Opposition Members and others as being useless for providing future jobs for young people? Does he agree that the record of the YTS has totally vindicated the claims made for it?

Mr. Morrison: I agree with my hon. Friend in all but one respect. I regret that some Opposition Members still try to ridicule the scheme. That does no good to the youngsters who are not part of it. It must be better to have a scheme of work experience than to have none.

Ms. Clare Short: Why, if the YTS is so popular, is the Minister proposing to make it compulsory? Will he admit that the real reason is that he wants to reduce the minimum level of supplementary benefit above which the YTS allowance operates, so that the allowance can be reduced to a level even lower than the present one?

Mr. Morrison: I do not know why the hon. Lady uses the word "compulsory". I have always maintained, and will maintain, that the YTS is voluntary.

Mr. Nicholls: Does my hon. Friend accept that the proposal that school leavers who do not wish to take a place on the YTS should not be entitled to supplementary benefit is welcome to many Conservative Members? Is it not remarkable that Opposition Members would far rather that a youngster started his working life on the dole than have a scheme of training that would equip him for a working life?

Mr. Morrison: It is remarkable that Opposition Members believe that it is better for youngsters to go on the dole when they have the opportunity to go on a training scheme.

Mr. Sheerman: Is it not true that what youngsters want most are jobs? They want a decent start in life. Will the Minister stop being mealy-mouthed and fudging this issue? Does he believe that supplementary benefit should be withdrawn from those who choose not to go on youth training schemes? Is that Government policy? Does he realise that at the stage when the youth training scheme could begin to become a much better quality scheme it will be undermind completely by those proposals? Finally, does he understand that he will place a stigma on youth training from which it will never recover?

Mr. Morrison: The hon. Gentleman heard what I said about supplementary benefit. He must accept that relevant training is necessary to find jobs. That is precisely what the youngsters on YTS received last year, and are getting this year.

Trade Unions (Postal Ballots)

Mr. Rowe: asked the Secretary of State for Employment how many trades unions have applied for public money to cover the cost of postal ballots under the provisions of the Employment Act 1980.

Mr. Tom King: I am informed by the certification officer that 26 trade unions have applied for public money under the provisions of the Employment Act 1980 towards the cost incurred in holding secret postal ballots.

Mr. Rowe: Does my right hon. Friend derive encouragement from those figures, or does he believe that they show that there is no need to provide public money to encourage trade unions to carry out ballots?

Mr. King: One can draw some encouragement from the fact that, after an unpromising start, there is clear evidence that several trade unions understand the opportunities that exist in the legislation. I said that 26 unions had applied for public funds to hold secret ballots, and I understand that more major unions may follow that course, which will mean better opportunities for democratic choice for their members.

Mr. Skinner: Does the Secretary of State accept that it is nothing short of hypocrisy for the Government to tell trade unions that they should have postal ballots, when on 30 September the Government, under the guidance of the Chancellor of the Exchequer, told a group of business men to get together at the Bank of England to save Johnson Matthey bankers, at the same time as they are closing uneconomic pits—

Mr. Speaker: Order. I gave the hon. Gentleman the opportunity to ask a question about postal ballots, not about Johnson Matthey.

Mr. Skinner: Is there not one law for the City, which does not need postal ballots to use taxpayers' money, and another one for the trade unions, which are told by the Government to have secret ballots?

Mr. King: I hope that that made the hon. Gentleman feel good, but it did not have much to do with the question.

Mr. Peter Bruinvels: Is it not particularly to be welcomed that postal ballots are to be used by so many trade unions? Does this not show that trade unions are finally becoming democratic and truly wish to reflect the views of all their members and not just those of some of their Left-wing executive members?

Mr. King: Hon. Members will have seen the further statements from a number of trade unions, and one can take encouragement from the fact that, increasingly, trade unions are bringing their procedures into line with the legislation that we have passed, which I hope will be helpful and in the interests not only of their members but of better and more orderly conduct of industrial relations.

Mr. Ashton: How can the Government try to compel trade unions to ballot their members when the Government do not ballot their Back Benchers on measures such as the recent students grants measure?

Mr. King: I am surprised that the hon. Gentleman is opposed to ballots of trade union members—

Mr. Ashton: No.

Mr. King: I am glad to see then that he supports our proposals and that that view is spreading to the Labour Benches.

Wages Councils (Inspections)

Mr. Dixon: asked the Secretary of State for Employment how many inspections by the wages councils have taken place in the last 12 months; and how many prosecutions there have been as a result of such inspections.

Mr. Peter Bottomley: In the 12 months ending 31 October, the Wages Inspectorate checked the pay of workers at 43,079 establishments. One of the employers was prosecuted.

Mr. Dixon: Is it not a disgrace that all these inspections resulted in the prosecution of only one employer of the many who are robbing the lowest paid, while in the miners' strike hundreds of miners are arrested, handcuffed and put into gaol, simply for standing on the pavement, or simply for shouting "scabs"?

Mr. Bottomley: The hon. Gentleman will realise that the level of prosecution is roughly the same as in the early years of the last Labour Government. I prefer to leave the rest of his question to a different debate.

Mr. Fallon: Does my hon. Friend know that the arrears paid in wages as a result of these visits was £1·8 million, whereas the Wages Inspectorate costs £3 million to run? Would it not be better if, instead of fussing about regulating wages and conditions, we allowed young people in the north to price themselves into work?

Mr. Bottomley: As my hon. Friend knows, the Government are considering the future of the wages councils system. The point about young people will be


taken on board, but even my hon. Friend will recognise that not every young person in every region will get a job, at whatever level of wages.

Dr. McDonald: Why are the Government so keen to listen to their hon. Friends who suggest that they should abolish the wages councils on the pretence that this would greatly increase the number of jobs available, particularly for young people? Is the Minister not aware that even if the wages councils were abolished, at best only 8,000 more jobs would be created—a tiny proportion of the number of jobs needed to deal with the 3 million unemployed?

Mr. Bottomley: I fear that the hon. Lady was not listening to my other answers. The position of young people now is rather different from what it was 10 years ago, and the rise in the relative wages of young people has been associated with a reduction in job opportunities for them.

Enterprise Allowance Scheme

Mr. Phillip Oppenheim: asked the Secretary of State for Employment how many jobs are estimated to be created for each entrant to the enterprise allowance scheme.

Mr. Alan Clark: In addition to the 60,000 people directly assisted by the enterprise allowance scheme to set up their own businesses, we estimate that about 25,000 additional jobs have been created by those businesses so far.

Mr. Oppenheim: Does my hon. Friend agree that, despite the many Labour detractors, this scheme has been highly successful and has greatly benefited many of my constituents and created jobs in my constituency? Is it not an extremely economical way to create jobs, unlike many of the hare-brained schemes proposed by the Labour party?

Mr. Clark: My hon. Friend is entirely right, although I do not think, to do them justice, that Labour Members criticised the scheme, which is welcomed by the House as extremely effective. Its most obvious merit is that it survives after the grant has ceased and generates additional jobs on top of jobs for those who apply successfully.

Mr. Dobson: Why do Ministers take the view that for the rich it is an incentive to get more money while for the people working in wages councils industries it will be an incentive for them to get less?

Mr. Clark: I do not wish to prevent the hon. Member from offering philosophical reflections, but the enterprise allowance is only £40 a week.

Mr. Maxwell-Hyslop: Will my hon. Friend confirm publicly what the Minister of State told me in a letter today namely that those who are not in receipt of unemployment benefit or supplementary benefit, but who are in receipt of a war disability pension, will now qualify for enterprise allowance?

Mr. Clark: I would not choose this occasion to disagree with my hon. Friend the Minister of State.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. James Hamilton: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I have been asked to reply.
My right hon. Friend is paying an official visit to the People's Republic of China.

Mr. Hamilton: Will the right hon. Gentleman inform the Prime Minister, when she returns, of the great anger on both sides of the House and outside at the imposition of VAT on each record sold in aid of the Ethiopian disaster fund? Is the Prime Minister aware that it is estimated that £500,000 has been raised by that record? Will the right hon. Lady recognise this as a one-off appeal? Bearing in mind that the Government changed their minds about student grants, cannot they change their minds on this?

Mr. Biffen: I appreciate the motivation of those involved in the records production. I fully appreciate that many hon. Members on all sides are disappointed that the Government cannot find some discriminatory fiscal arrangement for the sales of the record, but in their stand the Government are following the tradition of successive Governments. The real test is to set that decision against the amount of money spent on aid by this regime.

Mr. W. Benyon: Will my right hon. Friend draw the Prime Minister's attention to the trial in Northern Ireland last week of private Thain of the Light Infantry? Will he tell the Prime Minister how deeply disturbed many of us are at the sentence imposed in the dangerous conditions applying in Northern Ireland? Has not the time come for a radical review of the working of the yellow card?

Mr. Biffen: I shall, of course, carry out my hon. Friend's request.

Mr. Steel: Will the right hon. Gentleman explain to the Prime Minister when she returns that one of the reasons for the Government's drop in popularity at the Enfield, Southgate by-election, and in opinion polls, is that on a range of matters the Government are completely out of touch with the public's mood? Does he understand that that applies particularly to the relatively simple case of imposing VAT on the Christmas record made to benefit Ethiopia? Why does the Chancellor refuse even to see an all-party delegation on that subject?

Mr. Biffen: The physical embodiment of the success at Enfield, Southgate will soon be at this Table. The right hon. Gentleman has to live with the bitter harvest of not very near misses.

Mr. Penhaligon: We would have the right hon. Gentleman on that swing.

Mr. Biffen: I should be more than delighted to have the hon. Gentleman's posse campaigning for me in Shropshire, North. I can think of no better counter-production than that.
The case for the record causes genuine sentiments of charity and compassion for the Ethiopian famine. However, the Government are following their well-proven record of not making discriminatory gestures. The real test


of our policies can be measured by the £35 million that we are giving to Ethiopia and by the £51/2 million to £6 million to the Sudan.

Mr. Gregory: Will my right hon. Friend ensure that county councils and all those engaged in the welfare of former prisoners are instructed by the provision of clear guidelines so that there is no repetition of the appalling tragedy that took place concerning the sex pervert who killed four-year-old Marie Payne? Will he ensure that clear guidelines result in proper social welfare for ex-prisoners so that children are not put into such tragic danger?

Mr. Biffen: My hon. Friend raises a matter which I know will cause the gravest disquiet within the House and outside. My right hon. Friend the Prime Minister will pay particular attention to his point about vetting and investigation.

Mr. Meadowcroft: asked the Prime Minister if she will list her official engagements for 18 December.

Mr. Biffen: I have been asked to reply.
I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Meadowcroft: Did not the Government completely misread the feeling in the country and. I believe, in the House over VAT being imposed on the Band Aid single by sheltering behind bureaucratic traditions? Is there not a feeling throughout the country that in this instance the expression of concern for Ethiopia should be recognised and that the Government should not be the sole beneficiary of VAT revenue from this record?

Mr. Biffen: I do not think that I can helpfully add to what I have already said.

Mr. Lawrence: Is my right hon. Friend aware that the entire House will welcome the visit to Britain of Mr. Gorbachev and the Russian delegation? Is he aware that they are here to engender a feeling of trust, which we all welcome? Does he agree that the best way in which they can engender that feeling is to show that they are trustworthy in their undertaking to abide by the Helsinki agreement and their undertakings on human rights? If they give us the trust that will enable us to believe that they will honour those commitments, it will be so much easier for us to believe their promises on peace and security.

Mr. Biffen: I am sure that my hon. and learned Friend speaks for the whole House when he talks of the welcome that there is for the visit of Mr. Gorbachev and the Russian delegation. I agree with him that the real hope lies in the development of trust, which is a patient plant which is nurtured by long and quiet negotiations rather than in a hothouse of propaganda. He is right in saying that the way in which it is monitored, both in the House and by the British public outside, is the extent to which human rights are upheld.

Mr. Kinnock: When the Prime Minister said yesterday evening that the Government can give training to every young person up to the age of 18 years—"and we know that we can do that" — did she mean that the Government will provide two years of training for all those who leave school at 16?

Mr. Biffen: The answer depends very much on the outcome of the investigation that is now being undertaken by the committee under the chairmanship of my hon. Friend the Minister for Social Security.

Mr. Kinnock: Will the Lord Privy Seal join me in regretting that the Prime Minister appears to have raised false hopes in what she said yesterday before she went off on her visit? May I prevail upon the right hon. Gentleman to urge upon the Prime Minister, when she returns, to recognise that an extension of training to two years—universally—would be very welcome, especially if such a training programme ensured training of high quality, permitted satisfactory education provision, leading, if necessary and where appropriate, to qualifications, ensured adequate pay and led to a job? Lastly, and importantly, the right hon. Lady should ensure that such a scheme is not compulsory or takes the form of conscription or coercian by the withdrawal of benefits to make young people destitute.

Mr. Biffen: The remarks of my right hon. Friend the Prime Minister yesterday were some sound and robust observations that were legitimate and consistent with consideration of an issue that is under discussion by a committee. Of course I shall convey to my right hon. Friend that the right hon. Gentleman is now a convert to the Government's policy and their highly successful youth training scheme. The scheme is at the centre of the Government's policy against unemployment for the young and its growing success will be a part of our fortune.

Mr. Maples: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

Mr. Biffen: I have been asked to reply.
I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Maples: Will my right hon. Friend find time today to congratulate the England cricket team on coming back from the dead so spectacularly, and will he join me in expressing the hope that the Opposition do not discover how to pull off the same trick?

Mr. Biffen: I should be happy to comply with both parts of that request.

Mr. O'Brien: Will the Leader of the House convey to the Prime Minister the situation facing the unemployed in my constituency, which covers Leeds and Wakefield metropolitan district areas? Will he inform the Prime Minister that, over the past five years, eight collieries have closed in the West Yorkshire county council area and that the plight of the unemployed, particularly miners, is serious? Will he advise the right hon. Lady to do something about bringing in some resources to reduce unemployment in west Yorkshire?

Mr. Biffen: Of course I shall pass on that message, but I must say to the hon. Gentleman that a campaign to bring about greater employment must be run throughout the United Kingdom, not merely in one selected region or another. In that context, I hope that the hon. Gentleman will take comfort, as I do, from the fact that 250,000 people are at work today who were not at work a year ago.

Mr. Fallon: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

Mr. Biffen: I have been asked to reply.
I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Fallon: Does my right hon. Friend accept that on the day when the victor of Enfield, Southgate is due to take


his seat, many people outside the House will be appalled to learn that its facilities are extended to convicted terrorists, whatever their cause?

Mr. Biffen: I think that there was a hidden message in that question, and if it is what I imagine it is, I do not think that anything that I could say would be half as adequate as what was said by the Labour Chief Whip, the right hon. Member for Bristol, South (Mr. Cocks).

Mr. Benn: In congratulating the Prime Minister on her visit to Communist China to hand over British colonial control in Hong Kong, may I ask the Leader of the House to tell the right hon. Lady that that creates an excellent precedent for ending colonial control in the Falklands, Gibraltar and Northern Ireland?

Mr. Biffen: The right hon. Gentleman is in the market place of politics, and, very rightly, is marketing a very exotic brand that enables those issues to be linked. I think that we all understand why he sits where he does.

Q 5. Mr. Dover: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

Mr. Biffen: I have been asked to reply.
I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Dover: Does my right hon. Friend accept that any announcement made later today about the reduction in the percentage that local authorities can spend on capital expenditure from receipts from council house sales will be a bitter disappointment and a let-down to hon. Members on both sides of the House who have supported council house sales when the construction industry is at such a low level as it is today? Would that not show that the Government are able to control public expenditure only by cutting capital spending?.

Mr. Biffen: I note with interest what my hon. Friend has to say, and I am sure he will realise that I cannot anticipate what may be said later by my right hon. Friend the Secretary of State for the Environment.

Q 6. Mr. Sean Hughes: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

Mr. Biffen: I have been asked to reply.
I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Hughes: As it appears that the youth training scheme is to be compulsory, will the Leader of the House ask the Prime Minister whether she will ensure that machinery is set up to make sure that the scheme is not used, under any circumstances, for cheap labour?

Mr. Biffen: The hon. Gentleman is getting a little over-excited in this pre-festive season. I merely ask him to await the outcome of the inquiry that is being presided over by my hon. Friend the Minister of State.

Mr. Ward: Is my right hon. Friend surprised that, in order to get the electors of Enfield to read its election literature, the Liberal party found it necessary to disguise it as Labour party propaganda?

Mr. Biffen: There must be a very snappy and succinct answer to that question, but, alas, it eludes me. All that I can say is that that did not seem to succeed.

Ms. Clare Short: asked the Prime Minister if she will list her official engagements for Tuesday 18 December.

Mr. Biffen: I have been asked to reply.
I refer the hon. Lady to the reply that I gave some moments ago.

Ms. Short: Given the propaganda from the Government Benches suggesting that the answer to unemployment is to cut wage levels, is there any decent minimum which the right hon. Gentleman thinks the people of Britain should earn in return for employment, or does he want our wage levels to drop to the standard in Third world countries?

Mr. Biffen: The hon. Lady is confusing the argument that we should keep an increase in wage levels to below the rate of inflation with all those other arguments which she now makes and which are a total distortion. Again, I must ask her to judge the policy, not her own rhetoric.

Ethiopia Refugees

Dr. David Owen: (by private notice) asked the Minister for Overseas Development what urgent steps are being taken to fly in aid to the refugees from the Tigre province of Ethiopia who are now in camps in Sudan?

The Minister for Overseas Development (Mr. Timothy Raison): Eleven thousand, seven hundred and fifty tonnes of cereals aid from Britain for the United Nations High Commissioner for Refugees were landed at Port Sudan in late November. We have just received a further appeal from the High Commissioner, and I have today decided to give £1 million to help him with this extremely serious problem.

Dr. Owen: While £1 million is helpful, does not the right hon. Gentleman recognise that supplies are now urgently needed, as day by day the number of people in these camps increases and no extra food is scheduled to come in through the ports until the end of January? Is not there an urgent need for Hercules aircraft to be made available to fly in from Cyprus, through Egypt, to Sudan and which could land at the airstrip at Kassala? That should be done in the next few days if we are not to see a repeat of terrible hardship.
Will the Minister also comment on the stories that these refugees are being bombed by MIGs of the Ethiopian air force and that those who are supporting the liberation force in Tigre are being compulsorily moved south? One of the reasons for moving into Sudan is their fear that they will be unable to continue to live in Tigre. They are being compulsorily moved into the south of Ethiopia in order to take them out of the province of Tigre. This is a serious humanitarian issue which is getting worse day by day. I hope that the Minister will make RAF aircraft available as urgently as he can.

Mr. Raison: I accept that this is a serious problem, to which I am giving close attention. One must think cautiously about whether it is best to move substantial quantities of grain by aircraft. The important thing is to get the supplies there, and that we aim to do.
As to the attacks that are reported to have been made on people coming from the Tigre area, I have today asked our Ambassador in Addis Ababa to make it clear to the Government there that we hope that they will do nothing to damage the movement of people or food in these areas. I discussed resettlement with General Mengistu and others when I was in Addis Ababa recently, and I made it clear that we would watch cautiously anything that was happening in this regard. We are absolutely right to do so, and I was right to resist his plea for endorsement of their resettlement policy.

Mr. John Wilkinson (Ruislip-Northwood): At the outset I wholeheartedly welcome my right hon. Friend's timely initiative. Having visited the camps concerned with my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) only three weeks ago, I know that the situation on the ground is truly desperate. In the first camp we visited there were 25,000 Eritrean refugees and we were told that they were bombed by the Ethiopian air force, harassed by the Ethiopian army and driven from their homes by the Ethiopian armed forces. The Tigrean refugees were in a hideously desperate state. Unless the

western Governments can find some way of dealing with the problem at source, and can get aid into those two provinces—huge areas of which are controlled by the Liberation forces and not by the Ethiopian Government — it will be difficult fully to alleviate the problem. Nevertheless, the Government of Sudan require every assistance, and what my right hon. Friend is providing is timely and welcome.

Mr. Raison: There is no doubt about the difficulty of getting food to these areas. I believe that the right way to get it there is through the medium of the experienced voluntary agencies. As for the bombing, I have already made my position clear on that point.

Mr. Nigel Spearing: If the Minister has not already done so, will he take steps to estimate the total likely drain of refugees into the Sudan in the next two to three months or more?

Mr. Raison: The best estimate I have is that arrivals by 15 December totalled 110,000 and that a further 150,000 to 160,000 might be expected by the end of March. Those are very substantial figures.

Mr. Churchill: Is my right hon. Friend aware that the only possible excuse for the vast grain mountains which are being piled up in Europe under the common agricultural policy would be the adoption of a policy of the utmost generosity towards not only the Sudan and Ethiopia but also the other countries of the southern Sahara which are desperately affected by the present famine and drought? Will my right hon. Friend consider the suggestion that Hercules aircraft should be provided? It is not just a question of supplies but of getting them there in time.

Mr. Raison: I accept entirely the point made by my hon. Friend that it is imperative to find ways of getting supplies to where they are most needed in time. We are considering carefully the best way to do this. As for the European grain mountain, I am sure that my hon. Friend will have noticed the recent decision of the European Community to provide no fewer than 1·2 million tonnes of grain before the next harvest. That is a very substantial quantity.

Mr. John Home Robertson: Is the Minister aware of the scale of the wheat surpluses not only in continental Europe but in Britain? Authoritative estimates suggest that 3 million tonnes of surplus wheat will be carried over from the current year into the crop year after the next harvest. Can the Minister not make a virtue of this surplus and ensure that before it is too late sufficient of this vitally needed food is transported to the areas where it is desperately needed.

Mr. Raison: I really do believe that the total of 1·2 million tonnes to which I have just referred represents a very substantial quantity of grain. It will be supplemented by very large contributions from the United States, Canada and other large scale grain producers.

Mr. Jim Lester: My right hon. Friend's announcement is indeed to be welcomed, but will he also recognise from his visit to Ethiopia that not only food but blankets and all sorts of medical supplies are urgently required in these camps? The figures which my right hon. Friend has been given of the number of people on the move from Eritrea and Tigre into Sudan are only part of the


problem. My right hon. Friend probably knows that 150,000 refugees from within the Sudan have moved to the Gezira region. It is a much bigger refugee problem than we realise.

Mr. Raison: I believe that I do understand the vastness of the problem, and I hope that I am taking appropriate action to deal with it. I accept my hon. Friend's point that it is not just a food problem. Immediately upon my return from Ethiopia I ordered a further consignment of 18,000 blankets to help to deal with the very severe problem of cold in some of these areas.

Mr. Tam Dalyell: How many trucks has Britain sent?

Mr. Raison: I shall write to the hon. Gentleman.

Mr. Jim Spicer: Will my right hon. Friend accept that although he is being implored by all sides of the House to send more and more aid, this country and the western world have to remember that the root cause of many of these problems is not just the drought but the viciousness of the regimes and complete administrative collapse. If we continue on this course, will my right hon. Friend accept that we shall be sending aid to almost every country in Africa, not just for one year but for the foreseeable future?

Mr. Raison: I agree entirely with my hon. Friend that the problems of Africa owe a great deal to maladministration and occasionally to viciousness on the part of the Governments concerned. But the fact remains that the human need is so enormous that we have no alternative but to respond as effectively and quickly as we possibly can.

Mr. Jeremy Corbyn: Is the Minister aware—[Horn. MEMBERS: "Boo."]—that this year the Government are likely to spend some £30 million on storing grain for no good purpose whatsoever — [Interruption.] Will he tell the House exactly how much money is being spent on food aid this year to the African countries that are suffering drought? Is not the continual production of grain for stockpiling in Europe an insult— [HoN. MEMBERS: "The hon. Gentleman is an insult"]—to the poorest people in north Africa and should not his Government in future be diverting resources to development aid to those countries that are suffering so badly this year?

Mr. Raison: I have already given the House an idea of the substantial quantity of grain that is being committed to the support of Africa in the coming year. One fully understands that grain in store appears to be instantly available for dispatch, but there is a real cost to that. The cost of storing a tonne of grain for one year is about £25, but distributing it on the ground in Ethiopia is about £245.

Mr. Bowen Wells: Will my right hon. Friend confirm that 80 per cent. of aid from the EEC is allocated to francophone countries and none to Sudan? If that is so, will he make certain that those decisions are reversed?

Mr. Raison: I very much doubt whether that is the case, but I shall certainly make sure that in discussions about how to use community aid in the coming year we shall ensure that it goes where it is most needed.

Mr. George Park: Is the Minister aware that my constituency has one of those grain

warehouses stuffed to the roof with food grain? My constituents cannot understand, and neither can I, why that grain should remain there when there is famine in Africa.

Mr. Raison: As I have just said in reply to an earlier question, we must realise that there is a substantial cost in moving grain. Nevertheless, the Community, and our other major Western partners, have agreed to the shipment of substantial quantities of grain over the coming months.

Mr. William Cash: Will my right hon. Friend explain why only 1·2 million tonnes are being released from the European intervention stocks, n view of the cost of keeping it there, when I was told by the Ministry of Agriculture, Fisheries and Food the other day that 10 million tonnes are currently in surplus in intervention stocks?

Mr. Raison: The point that I have just been making is that the cost of moving the grain is incomparably greater than the cost of storing the grain. We cannot doubt that fact. The 1·2 million tonnes which will be provided by the Community will make a major contribution to the problem that faces us.

Mr. Russell Johnston: Is it the case, as reported in The Times today, that voluntary workers have been critical of the way in which the United Nations High Commissioner for Refugees has conducted affairs in southern Sudan? Has the right hon. Gentleman made any representations on that? I urge the right hon. Gentleman to be generous with grain, but will he point out that if many of the hon. Members who have been making the point about it had their way, there would be no grain in surplus to distribute?

Mr. Raison: It is certainly true that the surplus stocks produced by the common agricultural policy do enable us to get hold of grain fairly easily when the need arises.
I have not had detailed complaints about the operations of the United Nations High Commissioner for Refugees in Sudan, but if there are feelings that he is not doing his job properly, I should be willing to take that up with him.

Mr. Ivor Stanbrook: Of all the causes of mass starvation in Africa, including overpopulation and bad government, there is one—famine—which is not now beyond the capacity of man to overcome. What are the United Kingdom Government doing to lead an international campaign to eliminate famine?

Mr. Raison: We have this year, either bilaterally or through our membership of the EC, provided over £66 million of drought-related assistance to Africa, and we intend to continue, in conjunction with our partners—the Community, the World Bank and so on—to play a big part in trying to tackle the enormous development problems which face the African continent.

Mr. Stuart Holland: The Minister must be aware of the judgment by War on Want and other agencies that, if there were no war in this area, there need be no famine. Why is he still washing his hands of the war? When he saw General Mengistu, did he or did he not ask for the Dergue Government to declare a cease-fire in response to the offer of safe passage made by the liberation fronts? Surely he is aware that the British public are scandalised by the fact that, while through aid efforts we are seeking to save life in Ethiopia, the Addis Government appear ready to take it.

Mr. Raison: I said to the Ethiopian Government that I hoped that they would do all that they could to allow the movement of aid to those areas where it is most needed. As I have told the hon. Gentleman and the House before, I believe that the best way of dealing with the problem is by working through the voluntary agencies and the International Red Cross. To ask the Ethiopian Government to do something that they certainly would not do will not really help to deal with this very difficult problem.

Mr. Peter Snape: On a point of order, Mr. Speaker.

Mr. Speaker: I shall take points of order afterwards.

Mr. Snape: With respect—

Mr. Speaker: There is no "with respect" about it. I shall take points of order afterwards.

Local Authority Capital Expenditure (England)

The Secretary of State for the Environment (Mr. Patrick Jenkin): With permission, Mr. Speaker, I will make a statement about local authority capital expenditure in England in the coming financial year. My right hon. Friend the Secretary of State for Wales will be making a statement later.
Since May 1979, local authorities in England have sold more than 600,000 homes to their tenants. The success of this policy, coupled with sales of other assets, has generated very substantial capital receipts which local authorities have been able to spend over a period of time. This statement is about the consequences for next year's capital spending programme.
On 18 July I explained to the House that in 1983–84 there had been an overspend of £368 million on the main local authority cash limit for capital expenditure. I warned that we could be heading for a much larger overspend this year. That was why I had to ask local authorities to exercise restraint.
Most authorities have complied with my request and I am grateful to them, but some have chosen to ignore it. So although the amount of the overspend this year has certainly been reduced it is still likely to be higher than in 1983–84 and I must therefore maintain my appeal for restraint for the rest of this financial year.
Consequent upon the Government's decisions published by my right hon. Friend the Chancellor in his autumn statement, I have to announce that plans for local authority capital spending in England for next year will be just over £4 billion. Receipts are expected to be about £2·1 billion and the cash limit on net expenditure is therefore being set at £1·95 billion. This net figure forms part of the Government's public expenditure planning total for next year. Any excess would be a potential charge on the contingency reserve.
Unless corrective action is taken, local authorities could well breach the cash limit next year as happened in 1983–84 and is happening this year. The problem arises because the accumulated reserves of capital receipts are now estimated at some £5 billion.
Those reserves belong to the local authorities. [HON. MEMBERS: "Hear, hear!"] What is at issue is the pace at which they may be spent. To reduce the risk of overspending next year we have to reduce the proportion of receipts which an authority may spend in any one year. For housing receipts, the prescribed proportion will be reduced from 40 per cent. to 20 per cent. from next April. For other receipts—for example, from the sale of land —the proportion will be 30 per cent. Local authorities will continue to have the right to use the balance of their receipts, but spread over a longer period. Without these changes, there is little doubt that there would have been substantial overspending next year. This in turn would be bound to lead to disruptive mid-year corrective action. It is clearly in the interests of local authorities to reduce that risk.
We shall be notifying individual authorities of their allocations shortly. I am honouring the assurance that I gave last year that housing allocations would be at least 80 per cent. of those for the present year.
Authorities that have complied in full with my request for restraint this year will receive an extra allocation next year amounting to an extra 5 per cent. across all service blocks. I estimate that this may add about £100 million to the total of allocations.
To help local authorities to plan their capital programme we are increasing from 2 per cent. to 5 per cent. the right to carry forward an underspend of the national cash limit from one year to the next. There will also he a margin of 5 per cent. above the cash limit up to which no corrective action within the year will be sought.
Subject to the same sort of provisos as last year, I can repeat last year's assurance that for the housing and other services blocks, allocations for 1986–87 will be at least 70 per cent. of those for the current year. For 1987–88, authorities can count on receiving at least 80 per cent. of 1985–86 allocations.
Apart from those assurances, the decisions that I have announced today relate only to 1985–86. I am consulting the local authority associations about possible changes to the system for the longer term.

Hon. Members: Resign!

Dr. John Cunningham: Is the Secretary of State aware that his statement will be received with horror by people on housing waiting lists, by those waiting for improvement grants, and by workers and management in the building industry? Does not his announcement represent another humiliating defeat for himself and his Department at the hands of the Treasury? Will the right hon. Gentleman confirm that, stripped of the jargon, he has today announced a cut of £400 million in housing investment and the freezing of £1·2 billion of local authorities' own assets—their own money? Will not the consequences of this decision be appalling for all those in difficulty in the housing sector—for people wanting homes as well as those engaged in the industry?
Does not the statement show to be sheer hypocrisy the comments of the Minister for Housing and Construction last Friday? The Minister said:
Homelessness is taken into account in deciding housing investment".—[Official Report. 14 December 1984; Vol. 69, c. 1339.]
Does the statement not mark the introduction of another draconian control by the freezing of local authorities' own cash in the bank? Will the Secretary of State tell us how his statement will help the homeless, the building and contruction industry or unemployed building workers? What credible macro-economic arguments can he adduce to support his decision?
Is the right hon. Gentleman aware that there are 1·25 million households on local authority waiting lists, almost 200,000 households living in overcrowded accommodation, 2,500,000 dwellings requiring repairs and 78,000 households which are homeless at present?

Mr. Greville Janner: The Government do not care.

Dr. Cunningham: The right hon. Gentleman's announcement today will have a catastrophic effect on owner-occupiers, more than 100,000 of whom are currently waiting for improvement grants. Will the right hon. Gentleman assure us that we shall have a debate on his announcement in Government time so that the House can debate these crucial issues and decide whether it will agree with what has been announced today?
Will the right hon. Gentleman also confirm that, in the best year of the Government's housing policy, there were 214,000 starts, a figure which fell short by 50,000 of the lowest total achieved under the preceding Labour Government? Will the right hon. Gentleman also recognise that the current building programme is heading for the lowest number of completions of council houses ever recorded, and the second lowest total for all housing completions?
The statement is a kick in the teeth for the building and construction industry. It flies in the face of all the advice that the right hon. Gentleman and his ministerial colleagues have received, right across the board, from employers' federations, the Royal Institute of British Architects, the CBI, the TUC, Shelter, the Shelter Housing Aid Centre, the Institute of Housing and everyone concerned with housing problems.
Will the right hon. Gentleman finally admit that his statement is yet another blow to the shire counties, because their authorisation for expenditure of their own receipts is reduced from 50 per cent. to 30 per cent.—and that in a week when the Audit Commission urged that capital investment by education authorities should be increased to meet the problems of education, especially in the shire counties?
Since the Government came to office, there has been a 64 per cent. cut in real terms in housing investment programmes. Even when capital receipts are taken into account, the figure is still 54 per cent. The Government are now spending less than 50 per cent. of what the Labour Government spent on Britain's housing needs. It is a disgrace.

Mr. Jenkin: The hon. Gentleman does not seem, even now, to have hoisted on board the fact that it has been the Government's policy consistently since we took office in 1979 to—

Mr. Willie W. Hamilton: To cut everything.

Mr. Jenkin: —to help the private sector to recognise that the great majority of people wish to become owner-occupiers. It is in the context of the expansion of owner-occupation that the success of the Government's policy is to be seen.
The hon. Gentleman seems to be under the illusion that, somehow, the announcement that I have made today represents a further reduction in spending on housing beyond what was announced in the autumn statement. He is quite wrong and he ought to know that the figure which was agreed last month for housing investment was £3·055 billion. It remains £3·055 billion. The measures that I have announced today are intended to ensure that that figure of £3·055 billion is delivered. As for the effect on the building industry, perhaps I might remind the hon. Gentleman that its output grew last year by 4 per cent. in real terms. It has grown by a further 4 per cent. this year and the latest forecast, which has taken account of the autumn statement, says that that output is likely to be maintained or even increased slightly next year. The forecast was produced by the Building Materials Producers Association.
The hon. Gentleman referred to homelessness. He might note that there are today more than 25,000 local authority homes which have been empty for more than one year. [HON. MEMBERS: "They need repairs."] They are


homes that local authorities could well use to deal with the problem of homelessness. As for improvement grants, I made it clear when the autumn statement was published that the Government gave a substantial boost to home improvement grants to the private sector and that the number increased tenfold over what had been done by the Labour Government. However, we did not see that as a permanent feature of housing policy—it was a two-year boost. The hon. Gentleman asked whether there would be a debate. That is a matter to be fixed through the usual channels, but the change in the prescribed proportion requires to be made by order.

Hon. Members: Resign.

Several hon. Members: rose—

Mr. Speaker: Order. I understand, and even hear, the strong feelings of hon. Members on this matter, but another statement and an important Estimates debate are to follow, I propose to allow questions on this statement to continue for half an hour before I call the next statement.

Mr. Geoffrey Rippon: Into what state of decay is our physical environment to be allowed to sink before the Government recognise the distinction between just spending money and investing it to create real jobs and real wealth? Will we have to wait for a typhoid epidemic or some other disaster before the Government will permit essential expenditure on infrastructure in our towns and cities?

Mr. Jenkin: The Government maintain a substantial programme of spending on infrastructure. Because my right hon. and learned Friend chose to mention typhoid, may I remind him that only this year we announced a significant increase in the capital investment in the water industries. I hope that that investment has his approval. A higher proportion of local authority capital expenditure is, rightly, spent on the refurbishment and renovation of defective housing stock. Only this year, we added a new factor to the generalised needs index to take account of the obligations of local authorities to improve defective housing.

Mr. Simon Hughes: How is it that the Secretary of State can tell the House, as he did in July, that capital spending makes a valuable contribution to this country's infrastructure and then be party to a policy which, a few years ago, first told off local authorities for not spending their capital, then provided them under the right-to-buy law with an opportunity to have more capital to spend, and now tells them that they cannot do as they choose with the money which, as the right hon. Gentleman says, is theirs? That leaves 800,000 people without homes this Christmas. How is that justifiable by any Government's policy at any time?

Mr. Jenkin: The hon. Gentleman has ignored the fact that since the system of capital control was introduced, it has always been recognised that local authorities could spend in any one year only a proportion of their receipts and that the balance would be carried forward for spending in another year. The proportions that operated during the last couple of years have led to a substantial capital overspend on the national cash limit. I have announced a reduction in the proportions that may be spent in one year,

but the local authorities will keep their receipts and will be entitled to spend them in the years ahead. The local authorities will phase their spending more sensibly to be within the Government's cash limits. That is a perfectly sensible policy.

Mr. Francis Pym: Does my right hon. Friend appreciate that this highly restrictive policy will be greeted by local government with a sense of injustice? Is this not another example of central direction and control? Is there any prospect of my right hon. Friend unlocking historic receipts which represent a substantial fund of assets that could be invested for the benefit of the community and, incidentally, help employment? Can my right hon. Friend hold out any hope that he will establish a long-term basis upon which the relationship with local government can be conducted unmolested by frequent ad hoc intervention by the Government?

Mr. Jenkin: Taking the last point first, my right hon. Friend will have heard that I am discussing with the local authority associations revised arrangements for the capital control system, which is not perfect and cannot be in operation for next year. I hope that a satisfactory arrangement can be operated in the years ahead. My right hon. Friend talked about unlocking capital receipts, but, in recent years, local authorities have made substantial use of their capital receipts. Our problem is that the overhang could give rise to a large potential overspend on the national cash limit which forms part of the public expenditure total. As my right hon. Friend knows, for years it has been the practice of successive Governments when drawing their bottom line to include a maximum figure for local authority capital spending. I am trying to ensure that that figure will be delivered and not substantially overspent.

Mr. Merlyn Rees: In the face of the decay of housing in part of my constituency, did the Secretary of State instigate this policy and take it into Cabinet, or can it be called the revenge of the Chancellor of the Exchequer?

Mr. Jenkin: The right hon. Gentleman should not read some of the nonsensical statements in the press about that. Before the autumn statement, the Cabinet agreed the total of £3·055 billion to be spent on the housing programme next year by local authorities, new towns and the Housing Corporation. That is the figure that stands today. I have announced measures to ensure that the cash limit is not substantially overspent. The Government of whom the right hon. Gentleman was a distinguished Member followed that practice. It is a responsible practice. On 6 December, the House approved the autumn statement and its figures. It is necessary to ensure that those figures can be delivered, and that is what I have announced today.

Mr John Heddle: Will my right hon. Friend confirm that £2·3 billion is locked up in local authority coffers in long-term mortgages granted to people who have exercised their right to buy? In view of falling interest rates, would it not be in the interests of those council's ratepayers, as much as in the interests of the borrowers of those mortgages, if that money were made available to building societies, thereby releasing money for local authorities to spend?

Mr. Jenkin: I can confirm the figure of £2·3 billion on the local authority books. If local authorities can sell their mortgage books to building societies or other financial institutions, there would be an addition to their receipts and a prescribed proportion of those receipts could be added to the sums local authorities spend on capital investment.

Mr. David Winnick: Is the Secretary of State aware that, because of his Christmas message today, tens of thousands of families continue to live in housing misery and some 25 per cent. of all building workers will remain on the dole? Is the right hon. Gentleman aware that, if he had the slightest sense of self-respect he would resign rather than allow the Chancellor to have this victory over him today?

Mr. Jenkin: The hon. Gentleman seems to forget that I am announcing capital expenditure by local authorities of more than £4 billion. That is a substantial sum by any standard. In these circumstances, and when the building industry is happily expanding—it has grown by 4 per cent. in two successive years—it is not unreasonable that the public sector should be expected to live within the cash limits that my right hon. Friend the Chancellor has published.

Mr. Peter Tapsell: When these matters were discussed in Cabinet, did my right hon. Friend tell his colleagues that this country urgently needs a major new house building programme to provide homes for the homeless and jobs for the jobless?

Mr. Jenkin: I am sure that my hon. Friend recognises that, overwhelmingly, people want to buy and live in the homes they own. It is right, therefore, that the private sector of the building industry should be given every encouragement to provide those homes for potential home owners. There is, of course, a need for housing for special groups — the disabled, elderly, and so on —[Interruption.] The programme I have announced allows substantial sums to be invested next year by local authorities and the Housing Corporation to provide for those special needs. I do not regard it as part of the normal duty of local authorities to provide huge volumes of new housing for general occupation.

Mr. Dave Nellist: What sort of house do you live in?

Mr. Speaker: Order.

Mr. Donald Stewart: Is the Secretary of State aware that many of us accepted the principle of the sale of council houses as rational and reasonable and, in fact, in some ways overdue? That sale was sought on the basis of the fact that the receipts from the sales would accrue to local authorities. What the Secretary of State is doing today will be regarded by those local authorities as a sordid swindle.

Mr. Jenkin: The right hon. Gentleman is quite wrong. Nothing that I have said takes that money away from the local authorities. All that I am asking them to do—many people would regard it as a sensible way to spend capital money—is to phase spending over a number of years, so that the total of capital spending is in accordance with the Government's overall spending priorities.

Mr. Anthony Beaumont-Dark: Does my right hon. Friend understand that most

local authorities will look upon this as yet another hammer blow against their freedoms of action? Does he further understand, or has anyone advised him, about the housing decay and the infrastructure that decays by the day in our cities? Will he explain to the House how it can be harmful to the economy to turn one capital asset into repairing and maintaining other capital assets? Does he not understand that, if we go on as we are now, with these voodoo economics, where we stick pins in all those people who carried out the policies that most of us believed in, we shall have no freedoms left, we shall have no homes left, and we shall have no sound and sane cities left. Will he change those policies at last and restore some sense and balance between local and central Government?

Mr. Jenkin: I admire the inventiveness of my hon. Friend's language more than the economic logic of his argument. My hon. Friend has considerable understanding of financial matters. He will be aware, therefore, that local authorities, which have used accumulated receipts to pay off loans or reduce the overall balance between their borrowing and lending, and which now want to use those receipts to undertake new capital expenditure, will inevitably have to increase their net borrowing to finance it. That is bound to bring pressure upon the public sector borrowing requirement. Although it is entirely right that substantial sums should nevertheless be spent on housing and other local authority capital projects — I have already given the House the figures—it is necessary to phase it over a number of years and not to allow substantial sums to be concentrated in a single year and so put the borrowing requirement under pressure.

Mr. J. D. Concannon: Does the Secretary of State hold clinic mornings in his constituency ? If he does, he must realise that more and more people are going to see their Member of Parliament about not having a house, or about a house that is falling down and requires repairs, and about a lack of grant? Will the Minister answer those points, and at the same time inform me and many other people why anyone should want to be a councillor under this Government?

Mr. Jenkin: Local authorities have a wide measure of discretion in what they spend—

Mr. Beaumont-Dark: Can you hear?

Mr. Jenkin: —but most local authorities have always recognised that for revenue and capital spending they live within the broad limits which the Government propose and the House approves. All I am asking this year is that, after two years—[Interruption.] No, what I am asking—it is for the House to decide—is that after two years when the local authorities capital cash limit was substantially overspent and involved substantial claims on the contingency reserve, and faced with the potential overspend next year, we should take steps to do what we can to keep it under control. That is a reasonable thing, which any Government faced with the same problem would do.

Mr. Fred Silvester: As there is apparently now some £5 billion accumulated reserves, can my right hon. Friend explain why we should be asking councils to pursue our policy of selling council houses, when plainly that is no longer of much benefit to them? Will he be kind enough to explain to me why those


reserves cannot be used to help the manifest deterioration of the housing stock which is visible in many of our large cities?

Mr. Jenkin: On the first point, the main engine for the sale of council houses has been the right to buy. That gives the tenant the right to demand, subject to the legislation, that he should be entitled to buy the house in which he lives. That right to buy is unimpaired. It is as strong as ever. It will result in substantial further sales of council houses to their tenants. I know that that has a great deal of support on both sides of the House. The question of how far and how fast local authorities may spend their accumulated capital receipts must be considered in the context of the public expenditure programme as a whole. It would make no sense to allow the expenditure to become bunched, as there is every prospect that it would, so as substantially to exceed the cash limit which the Chancellor has established, and which was approved by the House when it approved the autumn statement. It would throw the Government's economic planning into disarray.

Mr. Eddie Loyden: The Secretary of State will be aware that, during his visit to Liverpool, he recognised that Liverpool had the worst housing in the United Kingdom. What prospect does that local authority have of improving it, in view of the fact that today he is turning the screws again on local authorities, ignoring their needs, and further damaging the construction industry, in which there is unemployment of about 30 per cent. in that area?

Mr. Jenkin: I am well aware of the serious housing conditions in Liverpool. I and my hon. Friend the Minister for Housing and Construction have been to see them. I hope that the leaders of Liverpool city council will now agree to resume discussions with officials of my Department in the normal way, as every other local authority has done, so that we can agree a sensible HIP allocation. There is no sense in starting to shout and indulge in slogans accusing me of breaking promises when I have done no such thing.

Mr. Robin Maxwell-Hyslop: My right hon. Friend will remember that the Housing Act 1980 contained a special provision designed to prevent houses in designated rural areas migrating from homes into holiday homes. Will he therefore exempt the operation of the buy-back provisions from the capital controls? The sums of money involved are small, but, without that exemption, the will of Government and Parliament in that respect could, in practice, be frustrated.

Mr. Jenkin: I understand the importance which my hon. Friend attaches to that matter. I shall, if I may, write to him about it.

Mr. Janner: What possible logic can there be in requiring a city such as Leicester, as the Minister has now done, to freeze its housing money after last week requiring it to use its reserve to put down the rates? When a council is thereby forced to cut its contracts and to go back on its contractual obligations, who will pay the penalties? Will it be the Government or the ratepayer? Who will benefit? Will it be the unemployed?

Mr. Jenkin: The ratepayers of Leicester will benefit because Leicester city council, having built up substantial

revenue reserves, is only to be asked to disgorge some of them for the benefit of its ratepayers. It has nothing to do with capital reserves.

Mr. Michael Latham: What calculation has my right hon. Friend made of the effect of this economically incomprehensible statement on the number of unemployed in the construction industry?

Mr. Jenkin: The economics of this statement are in support of a policy that my hon. Friend has supported consistently for the past five years — that the Government should keep their borrowing and spending under tight control. That is the policy upon which we are engaged with the support of a large number of people in this country. Capital spending by local authorities next year at over £4 billion is as provided in the autumn statement. All that I am asking is that the spending of the accumulations of capital should be spread over a reasonable period. That is why I am proposing the alteration to the prescribed proportion.

Mr. John Cartwright: Will the Secretary of State accept that thousands of council tenants in constituencies such as mine will never be able to afford to buy their homes and are condemned to live in damp, vandalised, substandard accommodation? Does he accept that thousands of building trade workers are looking for a job, and that local authorities are sitting on more than £4 billion of capital receipts? In those circumstances how can he justify preventing local councils from spending their money on what needs to be done now, not at an unspecified date in the future?

Mr. Jenkin: The hon. Gentleman should know that in many inner cities there have been between 40 and 50 successful examples of housing estates, where councils have entered into partnership with private developers to refurbish the estate. I hope that more councils will see that as a solution to the problem of their run-down inner city estates. Regarding the second part of the hon. Gentleman's question, I have nothing to add to what I have already said.

Mr. Richard Tracey: Is my right hon. Friend aware that the housing stock in the royal borough of Kingston upon Thames is extremely well managed, and that that council began selling council houses to tenants before many other councils? Will he ensure that the council is not penalised because of the profligacy of authorities represented by many Labour Members? Will he guarantee that the council will be able to carry out Government policy by renovating run-down, inter-war stock and providing improvement grants for owner-occupiers?

Mr. Jenkin: My hon. Friend will have noticed that I announced an additional 5 per cent. to the allocations of the majority of authorities which complied with my request for restraint last year. He will also note—the point was impressed hard on us by a number of those who came to see my hon. Friends and me about the request for restraint—that the complaint was made that we were penalising authorities that had already sold assets and had receipts, to the advantage of those that still had assets to sell. The new prescribed proportions that I announced today will apply equally to in-year receipts and accumulated receipts. Therefore, there will be no discrimination against those who have already acquired them.

Mr. Terry Davis: When the Secretary of State says that he has not announced any new cuts in housing expenditure in his statement, is he saying that the figures for housing expenditure in the Chancellor's autumn economic statement included the prescribed proportion of accumulated capital receipts? Or will he admit that in announcing a reduction in that proportion today from 40 per cent. to 20 per cent., he has announced a new cut in housing expenditure?

Mr. Jenkin: The hon. Gentleman is wrong. I have announced measures that will be necessary to deliver the housing figures that were in the autumn statement. The autumn statement included figures for local authority capital expenditure, and the measures are to prevent a substantial overspend of those figures.

Viscount Cranborne: I am sure that my right hon. Friend will accept that the powers enjoyed by local authorities are derived from powers given to them by the House. However, is he not worried that at a time of recession capital expenditure has been cut more than current expeniture, and that as a result, the type of investment that can lead us out of the recession has been needlessly clocked?

Mr. Jenkin: My hon. Friend is absolutely right. He will know that during the past four or five years local authority revenue expeniture has substantially exceeded the guidelines laid down by the House. For that reason, we have inevitably had to consider other areas of expenditure to keep the Government's total within the limits approved by the House. I entrirely agree with my hon. Friend that if we can get local authorities' current expenditure down —we are doing that through rate capping—we can take an easier view of their capital spending.

Mr. Derek Foster: Why does not the Secretary of State come clean? Is he not forcing local authorities to increase their balances so that he can further cut their grants next year? Is he aware that not even the Prime Minister defines overspending as spending one's own money?

Mr. Jenkin: The hon. Gentleman is confusing revenue balances with capital balances. They have nothing to do with each other.

Mr. Colin Shepherd: Is my right hon. Friend aware that a number of reasonable district councils are becoming increasingly frustrated at seeing their reasonable ambitions thwarted in spite of the fact that they are based on the successful implementation of a very popular policy? Will he consider their exasperation? Do I understand that the implications of his remarks are that if his number-crunching does not come out right this year, he will consider a moratorium next year?

Mr. Jenkin: In answer to my hon. Friend's first point, I am well aware of the disappointment of authorities. He is right to mention small district authorities, which may not have large capital expenditure programmes but whose programmes are dear to their hearts. I ask that programmes are phased over a period of years so that in aggregate the spending does not exceed the limits laid down by the Government. On my hon. Friend's second point, I hope that the measures I have taken will avoid any severe mid-term disruption. I have already said that we agree that there can be a 5 per cent. margin, with no question of coming

to the House and asking for futher restraint. If an excess goes substantially beyond that, I do not rule out the need to come to the House and ask for restraint.

Mr. Jack Ashley: Is the Secretary of State aware that if we accept the Treasury cuts —they are Treasury cuts—his Christmas message, as clear as a bell, will be no homes for the homeless? Instead of passively accepting the Treasury's decision, why does he not recognise, in the light of our exchanges this afternoon, that nearly the entire House is against the Treasury, and that it can be defeated? If he mobilises hon. Members on both sides, he can ensure that the Treasury treats these cuts as it treated the proposed cuts in student grants.

Mr. Jenkin: I hear what the right hon. Gentleman says. I would quarrel with him in his use of the word "passive". I recognise that the measure will be a disappointment to local authorities because they will be asked to spread their capital spending over a longer period than they had hoped. I ask the right hon. Gentleman to accept that the measure is in the interest of the overall management of public spending and that it is part of the policy that the Government have followed for many years.

Mr. Den Dover: If the Secretary of State sincerely believes that construction has increased during the past few years, why has the number of building workers out of work increased? Is he fully prepared to listen to the view of the construction industry, which will be exasperated and frustrated, and will show sheer disbelief at his announcement?

Mr. Jenkin: I assure my hon. Friend that I took many opportunities to listen to the views of the construction industry. The figures that I quoted about the 4 per cent. in real terms expansion last year, the further 4 per cent. in real terms expansion this year, and the prospects of maintaining or even increasing that growth next year, are accepted by the construction industry. They represent a welcome turn-round from earlier years.

Mr. Reg Freeson: Is it not the case that DoE officials have great doubts about those statistics? Will the Secretary of State please tell the House and my constituents in Brent how many of the 1,000 families who are living in bed and breakfast accommodation and other temporary hostels will be rehoused if the Government continually cut capital expenditure? Will he tell the construction industry and the House how we shall carry out the £10 billion worth of work on faulty houses and the £20 billion of expenditure required on private housing to bring them up to a decent standard? How does he expect that work to be done while he cuts capital expenditure?

Mr. Jenkin: To take the right hon. Gentleman's last point, the Government have never accepted and do not accept, that it is the responsibility of the taxpayer to maintain private houses. It is the responsibility of their owners. However, for people at the bottom of the incomes scale there can be a limited system of housing improvement grants, and I ask the right hon. Gentleman to await the consultation paper that we shall publish soon. There was a full debate on homelessness in the House on Friday and I commend to the right hon. Gentleman the speech made then by my hon. Friend the Minister for Housing and Construction.

Mr. Roger Sims: Is it not true that authorities such as Bromley, which have enthusiastically carried out the Government's policy of selling houses and land, are being positively penalised by the Government? Can my right hon. Friend explain, in layman's terms that non-economists can understand, why he will prevent authorities such as Bromley from carrying out projects that would create local employment, that would be paid from their resources and that could not possibly affect the PSBR?

Mr. Jenkin: I must ask my hon. Friend to accept that it has been a continuing policy of the Government for five years to try to control the general level of public spending and borrowing. There is no way in which that can exclude capital spending. I share my hon. Friend's aim, whereby, by achieving better control over local authority revenue overspending, we could devote more resources to capital spending. But until we can do that I must ask local authorities to live within the overall cash limit that the Government have laid down and that the House has approved.

Several Hon. Members: rose—

Mr. Speaker: Order. I said that I would end questions on this statement at 4·30 pm, but there appears to be great interest in it. Therefore, I propose to allow questions to continue for not more than another 10 minutes. Then we must move to the next statement, in fairness to those who are anxious to speak later.

Mr. Simon Hughes: On a point of order, Mr. Speaker.

Mr. Speaker: I do not think I shall take a point of order now. It simply takes up time.

Mr. D. N. Campbell-Savours: Can the Secretary of State advise me about what I should tell my constituents in my surgery this Saturday when they ask me why the local authority is refusing to give them improvement grants, to repair their homes or to carry out modernisation, when they know that next year Allerdale district council will be carrying at least £3·5 million in its balances on capital receipt account? How can we answer the complaints of those constituents who have a genuine grievance and who demand action from the public authorities?

Mr. Jenkin: The first answer that the hon. Gentleman should give to his constituents is that it is for the local authority to determine its priorities within the overall spending limits that have been laid down. The hon. Gentleman should be able to explain to his constituents that there cannot be unlimited spending either on capital or revenue accounts, and that inevitably, if the figures are to add up at the end of the day, the Government are responsible for laying down the rate at which capital receipts can be spent—[Interruption.] I understand their problems, but it is the primary responsibility of those who own their homes to maintain them, not to ask the taxpayer to do so.

Dr. Keith Hampson: Does my right hon. Friend accept that what really matters is not a Treasury forecast of what might become an overspend but the creation of jobs, and that there are few more sensible ways of doing that than by renovating the housing stock, which is not import-intensive? Is he aware that many of his colleagues sympathise with him, in that he and not the

Chancellor has been forced to come to the House to present this defence? Does he not believe that the power of the Treasury has increased, is increasing and should be diminished?

Mr. Jenkin: I assure my hon. Friend that my announcement today is the policy of Her Majesty's Government, as determined by the Cabinet. There is no question of it being the policy of one Minister or another. My hon. Friend knows that there must be a limit on public spending if we are to maintain the strategy on which we have embarked. That must include capital spending. We cannot stand by idly and allow massive overspend on local authority capital accounts or any other capital accounts. That is the purpose of cash limits.

Mr. Max Madden: Should not two broad conclusions be drawn from the statement: first, that the Secretary of State has no support from Conservative Members for his miserable statement; and, secondly, that the Government and the Conservative party no longer give a damn about the poor and deprived who live in desperate housing need in the many deprived areas of Britain?

Mr. Jenkin: I refute completely the second part of the hon. Gentleman's question. We are making provision for more than £4,000 million of local authority and Housing Corporation investment, which will provide overwhelmingly for those at the bottom of the incomes scale. I hope that the hon. Gentleman will withdraw that accusation. On the first part of the hon. Gentleman's question, I am bound to say that I did not expect a warm welcome for my statement, but it is part of the responsibilities of office to come to the Chamber and tell people the truth.

Mr. Robert Jackson: In his statement last week my right hon. Friend clobbered many local authorities run by his friends. What steps has he taken with this announcement not to clobber the same authorities?

Mr. Jenkin: I hope that my hon. Friend recognises the fact that we have deliberately set aside a sum that we estimate to be about £100 million to be added to the allocations of the responsible authorities which complied with my request of last July. I hope that that goes some way to meeting my hon. Friend's anxiety.

Mr. Jim Callaghan: Is the Secretary of State aware that earlier this year an all-party delegation of members of Rochdale borough council visited the Minister for Housing and Construction to express their grave anxiety about the housing stock in the Rochdale area? Is he further aware that, following our invitation, the Minister for Housing and Construction visited the borough and, at my personal invitation, visited the worst housing estate that I have ever seen — the Back o' the Moss estate—where he saw the dreadful conditions in which those human beings must exist? What Christmas message of good cheer do I have to take back to those good people?

Mr. Jenkin: I hope that the hon. Gentleman will take time off during the Christmas recess to inspect in neighbouring Oldham the former Strinesdale estate, which conformed precisely to the description of the estate that he has just given but which, with the help of the private sector, has been substantially refurbished and is now a pleasant place in which to live. I hope that Rochdale borough council and many other councils that have similar


estates will try to achieve in partnership with the private sector what they have been clearly unable to achieve on their own.

Mr. Tony Marlow: Did not my right hon. Friend hit the nail on the head in his previous answer? Is not the reality that £4,000 million is a hell of a lot of money? It amounts to £75 for every man, woman and child in the country, which every year represents £6 a week for a family of four? Is not the worst housing crisis in those areas, with largely Labour-controlled authorities, where housing resources have been violently mismanaged? Is not the answer to the problems of the taxpayer, the ratepayer and the homeless to privatise large sections of public authority housing?

Mr. Jenkin: I hope that we shall achieve greater private investment in inner city housing. There have been some successful pioneer schemes by several local authorities. My hon. Friend is right to say that that is the way in which we shall bring new hope and life to many decrepit, run-down areas.

Mr. Allan Roberts: Is the Secretary of State aware that the most pitiful aspect of his statement is that he seems to lack all knowledge of what is happening on the ground? Is he aware that Lawrie Barratt and others in the building industry have recently said that the joint venture schemes that the right hon. Gentleman has just described will no longer be able to continue as a result of the imposition of 15 per cent. VAT on building charges? Is he aware that the Sefton Conservative-controlled county council is one of the wax models into which he is sticking pins? Is he aware that there are already cases of dysentry in the Church Street estate in my constituency because that local authority, following his request for voluntary restraint, introduced a moratorium and has not got the money to put the drains or the houses right? Is he aware that today he has announced the death of the public sector building programme and that this is a worthy Christmas present from this Government to the homeless and the badly housed.

Mr. Jenkin: The hon. Gentleman is talking a great deal of rubbish. To describe expenditure of £4,000 million as the death of the public sector building programme is hyperbole which goes even beyond the hon. Gentleman's normal standard. My right hon. and hon. Friends and I are aware of many of the difficult housing conditions in our inner cities but we have to recognise that, over the years, despite the expenditure of large sums of public money, many of those problems have become worse. I point out the contrast where the private sector has come in, and many black spots have been turned into nice places in which to live.

Mr. Patrick Nicholls: Will my hon. Friend accept that effectively he is being accused of a cut in national investment? Will he put that accusation into perspective by confirming what I understand is the position, which is that last year there was an increase in both public and private investment and that, if current trends are followed, there will be an increase in that investment next year as well?

Mr. Jenkin: My hon. Friend is quite right. Construction output in the first three-quarters of this year is around £750 million up on the same period a year ago and the latest figures for new orders show a 6 per cent.
increase in the 12 months up to the end of October over the previous 12 months. Private industrial orders are up by 30 per cent. and private commercial orders are up by 11 per cent. Hon. Members should bear those figures in mind when they complain about the impact on the construction industry.

Mr. Jeff Rooker: What has happened since November 1982? The Prime Minister said then, in the debate on the Queen's Speech:
We need more capital spending by local government and in the public sector generally."—[Official Report, 3 November 1982; Vol. 31, c. 21.]
Today, the Minister has announced a major change in Government policy. Does the right hon. Gentleman accept that the figures that he has just given for the construction industry show how badly the construction industry has been affected? Today, it is working at a level that is 50 per cent. lower than in 1974. Will he put a figure to the question that he was asked earlier about the effect of today's announcement on jobs? Does he agree that the effect, counting the indirects, will mean 100,000 fewer jobs in construction and building next year?
Is it not desirable that we should, whatever the mix of public and private investment, get housing building starts back to the level of even the lowest year under the last Labour Government? Does the Minister accept that we should improve, maintain and repair the housing stock at a rate that is at least equal to the rate at which it is deteriorating? I should like, and I think that the House would welcome, firm solid answers to those questions.
Does the Minister know what it is like to be homeless on a waiting list, knowing that the local authority does not have the money either to build or repair? Why has the Minister launched such an attack on young owner-occupiers, who have been encouraged to buy both in the public and private sectors on the firm Government promise that there would be improvement and repair grants to put in inside toilets, proper bathrooms, kitchens and to re-wire electrical systems? Why has the Minister produced such a policy today? In the 11 years that I have been in the House, this is the most contemptible and disgraceful statement that I have ever heard from any Minister.

Mr. Jenkin: The hon. Gentleman has asked many questions, some of which were repeats of questions that have already been asked—

Mr. Rooker: But not answered.

Mr. Jenkin: They were answered earlier in the exchanges.
The hon. Gentleman's last point was about home improvements grants policy. The Government have made it clear that the system of mandatory grants for essential amenities is an important part of our housing provision. That will remain, and I hope that those who have bought houses without basic amenities will be able to apply for those grants. They are mandatory. On the wider discretionary improvement grants, there is no question of anybody having been promised that there would for all time—

Mr. Rooker: Yes they were.

Mr. Jenkin: No. The hon. Gentleman should examine what has been said. There is no question of any promise that for all time there would be a system of discretionary grants, whether on the miserable level left behind by the Labour Government, or on the very much higher level that


we achieved last year and the year before. It is primarily the responsibility of home owners to maintain their houses, and it is not the responsibility of the general body of taxpayers. That principle is warmly supported in many parts of the House.

Several Hon. Members: rose—

Dr. Cunningham: On a point of order, Mr. Speaker.

Mr. Speaker: Order. I normally take points of order at the end. Does this point of order rise directly out of the statement?

Dr. Cunningham: Yes, Mr. Speaker. I rise on a point of order to give you and the House notice that, following the next statement, I shall be seeking the Adjournment of the House under Standing Order No. 10 so that we can have an immediate opportunity to discuss the implications of this statement.

Mr. Dennis Skinner: On a point of order, Mr. Speaker. This is a point of order rising out of the statement.
We all understand that you have a somewhat difficult task, Mr. Speaker, when a Minister has to come to the Dispatch Box, and we understand that it is your job to select the people to ask him various questions. On this occasion, we understand that it was even more difficult. We realise that your job is to provide balance and to call a number of hon. Members supporting the Government and a number of hon. Members against. Is it not reaching a sordid level when Tory Whips have to go round to nobble a few people at the fag end of questions to get people to support the Government because everybody else is against them?

Mr. Speaker: Order.

Mr. Marlow: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. The last point of order was spurious, but in fairness, and as the hon. Member for Bolsover (Mr. Skinner) called for balance, I shall take the further point of order.

Mr. Marlow: Further to that point of order, Mr. Speaker. The last remark made by the hon. Member for Bolsover (Mr. Skinner) was about Whips talking to Government Back Benchers. The Whips may have spoken to Back Benchers, but they did not speak to me.

Mr. Concannon: On a point of order, Mr. Speaker. I shall be brief, and, as you know, Mr. Speaker, I do not usually raise points of order. However, I notice that the Leader of the House has been toing and froing during the statement and I wonder whether the right hon. Gentleman is prepared to make a statement on the future of this announcement, which has found few friends in the House? I understand that the Leader of the House has been out talking to the Patronage Secretary, and I have seen him out of the corner of my eye talking to you, Mr. Speaker.

Mr. Speaker: Order. I have no idea why hon. Members leave the Chamber.

Local Authority Capital Expenditure (Wales)

The Secretary of State for Wales (Mr. Nicholas Edwards): Mr. Speaker, with permission I wish to make a statement about the future arrangements for controlling local authority capital spending in Wales and the level and distribution of capital resources in 1985–86. The decisions that I am announcing this afternoon—[Interruption.]

Mr. Donald Coleman: On a point of order, Mr. Speaker. I think that I have had the desired effect, as things are quieter now. I could not hear a word that the Secretary of State was saying.

Mr. Speaker: Order. I thank the hon. Gentleman.

Mr. Edwards: The decisions that I am announcing this afternoon have to be seen against the background that since 1979–80 Welsh local authorities have invested, at 1984–85 prices, £2·2 billion in a wide range of projects which have significantly extended and improved the social and economic infrastructure in Wales. The Government's expenditure plans to be published in the forthcoming Public Expenditure White Paper, envisage that over the next three years they should invest a further £1 billion, again at 1984–85 prices. The largest service element within this total of £3·2 billion is some £1·4 billion in respect of housing.
In the course of the review of the control system which was announced in July, I have considered carefully the views both of the Welsh Counties Committee and the Committee of Welsh District Councils. They have emphasised the need for greater flexibility. They attached particular importance to being given a better view of the future trend in resources, and argued strongly for continued access to their reserve of accumulated receipts. Discussions on the way in which the system could be developed will continue in the new year.
Having taken full account of the associations' representations, the Government have decided to make a significant change to the rules governing the operation of the national cash limit. The present facility for carrying forward to the following year an underspend of up to 2 per cent. against the aggregate planning total, will be increased to 5 per cent. In addition, corrective action will not be taken to restrain spending if the cash limit is on course to be exceeded by less than 5 per cent. Any overspending will be taken into account when determining provision for a subsequent year. These changes should greatly reduce the possibility that we have to take corrective action part way through the year, and ensure that resources are not lost if there is only a moderate degree of underspending.
A principal reason for the capital overspending experienced in Wales in the last two years is that the allocation mechanism has not so far taken account of the inherent spending power provided by accumulated receipts. These are expected to amount to over £300 million next year, all but £10 million being in the district tier.
Districts argue that they should have complete freedom to spend their accumulated receipts; but not only would this have serious consequences for public expenditure control generally—and the level of PSBR—but it would


enable them to spend a major part of their receipts twice. This is because while housing allocations issued since 1981–82 have been calculated to include a large proportion of receipts forecast to accrue in each year, at the same time districts have been able to borrow to finance the bulk of their housing spending without needing to use the receipts built into the allocation. For this reason, they have been able to accumulate large reserves. It is reasonable to place a measure of constraint on their ability to use these receipts for a second time.
I have, therefore, decided to phase the use of these receipts by reducing, but not eliminating, the proportion which can be used to enhance the spending power of allocations in any one year. In the case of housing the proportion will be reduced by 10 percentage points from 25 to 15 per cent.

Mr. Dafydd Wigley: Shame!

Mr. Edwards: For non-housing receipts the prescribed proportion will be 50 per cent. These changes should significantly reduce the pressure on the all-Wales cash limit.
Last year I gave authorities forward indications of capital allocations based on 80 per cent. and 70 per cent. for the two later years. This year I intend giving forward indications again, but linked to 80 per cent. for each year to provide a firmer basis for planning.
I turn now to the resources available for 1985–86. Gross expenditure provision underlying the cash limit for the coming year will be £349 million, marginally higher than the level of provision for the present year. When the law and order services are added the total is £354 million.
Within this figure gross provision for local authority housing is £146·5 million. Each authority will receive sufficient to cover the forward indications given them in July 1984. In addition, bids for an allocation to meet expenditure needs on privately and publicly owned prefabricated reinforced concrete dwellings will be met in full. Bids for expenditure on enveloping schemes not covered by previous allocations will also be met in full. I am making provision to enable the two existing Welsh priority estates projects to continue and for a new scheme to commence.
The Housing Corporation's net capital provision will be £39 million. I expect receipts and private sector finance to enhance that total by another £3 million to £4 million.
Total resources for roads and transport, taking into account new receipts, amount to £64 million. Within this sum I have accepted just over £53 million for TSG purposes. This will enable the three new major highway projects announced in the Welsh Grand Committee last Wednesday to start in 1985.
Gross capital provision for other service blocks in 1985–86 is over £10 million higher than the projected level of spending in the current year—an increase from about £125 million to £135 million.
The enterprise zones have been given additional resources amounting to £2·3 million to further their development. In recognition of its regional status, the Polytechnic for Wales has also been given an individual allocation of £500,000 per annum over the next few years to promote its technological development.
Other allocations have been made for major coast protection works at Prestatyn, urgent refuse disposal schemes in Swansea, Rhondda and Ynys Môn, flood

alleviation works in Denbigh, repairs to the Brecon and Monmouth canal, and towards the cost of replacing the headquarters of Powys county council, which have become structurally unsound.
The cash limit provision for 1985–86, which is gross spending less forecast receipts, is £249 million excluding law and order services. To calculate the total available for allocation the cash limit has added to it a proportion of housing receipts, and deducted from it estimates of expenditure not counting against allocations, such as leased vehicles and derelict land clearance. The total calculated in this way is £263 million. Of this sum about £14 million is being withheld from those district authorities which resolved to spend in excess of the voluntary restraint level for the present year. If the authorities concerned are able to realise sufficient additional receipts, all or part of the allocations withheld will be restored to them as soon as possible after the end of the present financial year. Details of allocations have been placed in the Library of the House, together with an explanatory note on the new arrangements.
I believe that the new framework for managing local authority capital spending in Wales represents a fair and reasonable compromise between the objectives of local and central government. Coupled with the level of resources that I have announced it is clear proof of the Government's desire to provide a firm foundation for a wide and effective programme of worthwhile capital schemes.

Mr. Barry Jones: Has not the bad news been camouflaged? However, the allocation for technological development at the Polytechnic of Wales and the 80 per cent. forward indications will be welcomed. The statement can be described as being serious for housing authorities. It has grave implications for district authority powers to spend on services other than housing.
The right hon. Gentleman referred to the proportion of prescribed housing capital receipts. Does not a reduction to 15 per cent. represent a £27 million cut which will restrict the use of capital receipts for housing authorities in Wales? Is not this Scrooge-like and a poor Christmas present for the Welsh authorities?
Is not this bad news when added to the loss of about £30 million of capital spending power in the next year from non-housing capital receipts? The right hon. Gentleman appears to have had a drubbing from the Treasury. Clearly the Chancellor is out of control in terms of Welsh public expenditure needs.
Is the right hon. Gentleman aware that the Association of District Councils believes that casualties are inevitable in environmental improvement schemes, tourist projects, plans for seaside towns, the building of factories, infrastructure services for the entrepreneurial industrial innovator and recreational projects? Does not private enterprise insist upon such services before it locates industries?
Does not the statement mean fewer jobs in the building and construction industries than there were when the right hon. Gentleman took office? Does not the 1983–84 gross housing expenditure, compared with the proposed figure for 1985–86, point to a £60 million reduction? Is there not a decline in real terms of 25 per cent. for 1985–86 when comparison is made with the 1979–80 gross housing capital expenditure? Does the right hon. Gentleman guarantee that the new rules will prevent overspending and


that the midnight moratorium is a thing of the past? Are not the Welsh housing associations pottering along at only one sixth of their capacity, being prevented from making a dynamic contribution to the solution of our housing problems? Has the right hon. Gentleman not failed to give them an effective boost?
Is he aware that about 4,000 skilled building workers in Wales are now on the dole and that at least 14,000 unskilled building workers have lost their jobs since he took office? Are there not immense queues for renovation grants throughout Wales? Does he know that 39 per cent. of housing in Wales is of the pre-1919 era, especially in the south-east valleys? Is he aware that one third of these properties are in serious disrepair? South Wales has one of the worst records of homelessness of all areas in the United Kingdom and there are bleak forecasts of worse to come for teenage young and single-parent families. Local authority housing starts in 1983–84 totalled a miserable 1,500.
Does the right hon. Gentleman realise that his proposed funding of housing will not encourage a major attack on the problems to which I have referred? What of the backlog of housing renovation grants? Have the Government not decided, in effect, to deny themselves the chance of launching an imaginative programme of house building to the advantage both of the homeless and the jobless? This statement is a cruel disappointment. Wales will be disappointed today.

Mr. Edwards: At the beginning of his questions and later the hon. Gentleman drew attention to an important feature of what I said. He welcomed the future 80 per cent. indications and asked about mid-term moratoriums. A prime objective of the system that we are introducing and developing with local authorities is to give some certainty to local authorities so that they can plan their capital programmes over a period of years, have a degree of flexibility on cash limits and avoid both underspends and overspends from year to year and the necessity to take midterm action. The previous Government were faced with the problem of massive underspends, giving encouragement to spend and then having to haul in the spending powers of local authorities. We have had both underspends and overspends, and the system that we are introducing will give a great deal more certainty and assurance. It will reduce greatly the risk of mid-term action.
The hon. Gentleman asked about the effect of the reduction in the prescribed limit. He appeared not to understand that the reduction has been offset by a 27 per cent. increase in net provision for housing. He has missed the relationship that exists between the allocations made to authorities and their freedom to spend their accrued receipts. Housing provision is close to last year's figure. Estimated receipts are down and we are making a realistic assumption of housing receipts. To offset that, we have substantially increased — by 27 per cent. — the net provision for housing that is funded by the Welsh Office. We are maintaining at a high level expenditure on housing through the Housing Corporation. The corporation's power to spend will be enhanced by the new financial arrangements which we have made with the private sector for that purpose.
The hon. Gentleman spoke of the disrepair of the housing stock in Wales. I remind the hon. Gentleman that

the Labour Government whom he supported took practically no action on improvement grants. We have launched a major improvement programme which has substantially improved the condition of the housing stock. We have a 5 per cent. increase in the cash limit overall, which is above the inflation rate in Wales. We have a rising level of investment in the housing area and in the industrial sector. In addition, we have a massive road programme. That gives tremendous opportunity for the building industry in Wales in the year ahead.

Sir Anthony Meyer: Is my right hon. Friend aware that, within impossibly tight constraints, and given the Treasury's obsession with the public sector borrowing requirement, to the exclusion of pretty well every other economic objective, he has had a remarkable achievement in carrying the acquiescence hitherto of most Welsh local authorities with his policies for local government financing? Will my right hon. Friend say something about the future of the urban aid programme? Is it likely to be sufficiently ample to accommodate essential redevelopment work in town centres? Is the special project school likely to be large enough to cover certain essential works?

Mr. Edwards: In introducing this system of control I have tried to avoid the stop-go process from which we suffered and to maintain a consistent and reasonably high level of spending. Welsh local authorities have benefited from the restraint that they have shown in keeping down current expenditure. In per capita terms, capital expenditure in Wales is considerably higher than the corresponding figure in England. That is a recognition of need and of the current expenditure policies that are followed by local authorities in Wales.
In the programme that I have announced there are moneys to provide £19 million in capital for the urban programme. That sum is broadly in line with what local authorities tell us they will spend this year. The urban programme also includes current expenditure and the total to be spent on the urban programme will be over £25 million. I can tell my hon. Friend that there is provision for the continuation of special project expenditure. We have good examples of notable housing improvement that has been carried out in that way at Wrexham and in the Rhondda.

Mr. Wigley: Is the Secretary of State not disguising the reality by the way that he has mischievously used statistics? Over the five years from 1979–80 to 1984–85, there was a capital investment level of £440 million per annum. Over the next three years the level will drop to £330 million per annum. That is a drop of 25 per cent. in local authority capital investment at the very time when housing, roads, schools and everything else provided by local authorities require more capital spending and not less. Will the right hon. Gentleman come clean and admit that there has been a U-turn in Government policy? Both he and the Under-Secretary of State for Wales the hon. Member for Conwy (Mr. Roberts), are on record as saying that capital receipts will be available to local authorities to make up for the lack of finances for housing, housing repairs and renovation. He and his hon. Friend are on record as saying that. There has now been a U-turn, so let the right hon. Gentleman be honest with the House and with Wales.

Mr. Edwards: The hon. Gentleman's accusation is incompatible with the figures that I announced in my statement. Over the six years from 1979–80, local authorities in Wales will have invested about £2·2 billion in capital projects, and over the next three years they will be investing a further £1 billion. The hon. Gentleman's allegation was wrong.
I have already told the hon. Gentleman in my statement that local authorities increased their reserves and did not spend their receipts on housing improvement at a time when they could have done so. At that stage they were underspending. We are merely asking that they should not spend for a second time in a single year or in a short period, action which would destroy the Government's public spending programme as a whole.

Mr. Stefan Terlezki: I welcome my right hon. Friend's statement. It would be marvellous if we had money that we could throw about like confetti so that all the local authorities in Wales could spend it indiscriminately, but the time has come when we must be accountable to our ratepayers, and the local authorities must be good housekeepers. I am sure that Opposition Members will agree that if local authorities did not throw money away on nuclear-free zones, the Campaign for Nuclear Disarmament and all the fringe lunatics on whom they are spending money it would be available to build more roads and houses and for the social services. I welcome my right hon. Friend's support for the redevelopment of the Cardiff docks.

Mr. Edwards: I agree with my hon. Friend about unnecessary and frivolous expenditure by local authorities, but Welsh local authorities have made a considerable effort to meet our current expenditure targets, which is one reason why the per capita expenditure that I am announcing is nearly double that in England. It is a direct result of having lower current expenditure. I should also like to make it clear to my hon. Friend that that has enabled us to meet our commitments to cover the 80 per cent. forward indications that we gave local authorities, to meet provision for prefabricated reinforced concrete dwellings in full, to provide continuing enveloping schemes in Wales and to provide for the priority estates that have already been mentioned.

Mr. Coleman: May I tell the right hon. Gentleman that, despite all the flim-flam at the end of his statement, he does not put us off the scent that he is guilty of the crime of robbing local authorities of the right to spend their own money? Does not he recall his hon. Friend the Under-Secretary telling us repeatedly that the receipts from the sale of council houses would be used to build more houses? Will he say now how many houses will not be built in Wales as a result of his U-turn?

Mr. Edwards: The so-called U-turn to which the hon. Gentleman refers is that I have increased net provision to local authorities by 27 per cent. to take account of the fact that we shall have lower receipts in the year ahead.

Mr. Gwilym Jones: My right hon. Friend's references to the enveloping schemes will be welcomed in Cardiff. Last week mention was made of a child's guide to help one to understand the rate support grant settlement. May I suggest to my right hon. Friend that it would be desirable if there were a child's guide on why our local authorities may not freely spend their own capital receipts?

Mr. Edwards: The reason why local authorities in Wales may not freely spend their capital receipts is that they have already spent them once and increased their reserves by some £300 million. If they now spend all of them in a single year, that will have a significant effect on the Government's spending policies and on the level of the public sector borrowing requirement. All that I am seeking to do is to ensure that, if they spend that money for a second time they do not do it all in a single year, but in a controlled way over a period.

Mr. Geraint Howells: I wonder whether the Secretary of State, having been in office for five years, is proud of his record towards county councils and district councils in Wales? How does he think they will react once they know the contents of today's statement? I should like to ask the right hon. Gentleman three questions. What effect will today's statement have on employment in Wales? Will there be an increase in the number of houses to be built in 1985? Finally, when will the Secretary of State stand up for the people of Wales and their rights in the Cabinet?

Mr. Edwards: I believe that I have a good record with regard to local authorities in Wales. That is why they have had a good settlement for current expenditure and why we are now able to maintain a substantial capital programme. The hon. Gentleman asked about employment. The biggest single contribution to employment will be provided by the rising investment that is taking place in Wales as a result of the Government's firm control of public spending and borrowing, which is keeping interest rates down, restoring company profitability and providing jobs for the future.

Mr. Keith Raffan: I welcome the additional amount for enterprise zones and the special allocation for coastal protection works at Prestatyn, but is my hon. Friend aware that Delyn borough council has accumulated capital receipts specifically for the purpose of developing Holywell, a town ravaged by unemployment, most recently by the proposed redundancies of one third of the work force at Courtaulds greenfield, and that unless the council receives a special allocation, that desperately needed development will not go ahead?

Mr. Edwards: As my hon. Friend has recognised, his constituency has already done well out of the allocation for coastal protection and the additional amount for the enterprise zones. I have announced the continuation of a major urban programme, including the provision of urban development grant. Of course we shall consider carefully any applications submitted by his local authority.

Mrs. Ann Clwyd: Why does the Secretary of State for Disaster in Wales continue to try to persuade us that cuts are good for us when the news that he gave us this afternoon is evidently another slap in the face for the homeless, those on housing waiting lists and those who live in substandard accommodation? Is the right hon. Gentleman aware that my constituency of Cynon Valley has the worst housing in the whole of Wales, and the second worst housing in the whole of Britain? What hope does he hold out for my constituency, with the news that he gave us this afternoon?

Mr. Edwards: I say two things to the hon. Lady—first, that the one thing that local government has said consistently over the years is that it dislikes a system of


capital planning that does not enable it to plan over a period of years and involves stop-go. I am seeking to introduce a consistency that will enable local authorities to plan for the future. Secondly, the Government whom she has supported in the past did practically nothing to tackle the problem of the housing conditions in her area. This Government have undertaken a massive programme of housing improvement, and are continuing to do so through a whole range of measures.

Sir Raymond Gower: Is my right hon. Friend fully satisfied that, with careful administration and good housekeeping, Welsh local authorities will be able to meet their statutory obligations and fulfil the tasks that he has set them?

Mr. Edwards: Yes, Sir.

Mr. Donald Anderson: Is it not clear that, behind all the camouflage, we have yet another chapter of cuts when the need in Wales, particularly in housing, is rising all the time? As the Secretary of State said that he was proud of his record, may I recommend to him a new year's resolution, that he makes the worst year of the Labour Government in terms of housing completions his target for his best year?

Mr. Edwards: I am glad that the hon. Gentleman refers to the Labour Government, who slashed capital expenditure on housing over a period of years. At a time when housing receipts are falling, I take credit for having increased the net provision for local authorities by 27 per cent.

Mr. Allan Rogers: Will not the Secretary of State take on board the fact that the capital overspending that he talked about in his statement is the result of the need and subsequent demand for adequate housing in the valley communities? In the constituency of the Rhondda, which I represent, as a result of the right hon. Gentleman's exhortations we have one of the highest rates of owner-occupancy in the country, and 18,000 people are waiting for improvement grants. What hope can the right hon. Gentleman give those people for next year?

Mr. Edwards: The need was there when, three and four years ago, the same local authorities substantially underspent. What I am trying to do is to introduce a system that eliminates both the underspends and the overspends, and enables local authorities to spend in full the provision that is given to them. I remind the hon. Gentleman that he has one of the best examples of a priority estate project being undertaken, in his constituency.

Mr. Ron Davies: May I give the Secretary of State some comfort? May I welcome his decision to maintain support for the PRC improvement programme? However, does not the right hon. Gentleman appreciate and understand that the maintenance of that programme will put a further strain on the budget available for other housing sector programmes? Will the Secretary of State

confirm that one of the prime justifications for the sale of council houses was the release of receipts for local authority capital programmes? Will not his decision now mean that as well as being unable to meet their existing needs, local authorities will not even have the confidence to plan for the future? Does not he realise that he has demoralised and shattered the confidence of local authorities in Wales?

Mr. Edwards: No, because I have set a prescribed limit at this level to increase the allocations to local authorities and spread them widely and to meet the commitment to provide for PRC schemes in full. I again repeat that the bids which have been made have been met in full.

Mr. Roy Hughes: Does the Secretary of State appreciate that the decorative parts of his statement do not disguise the fact that this is another major blow to the economy of Wales, let alone to local government, which is tired of being made a scapegoat for the failure of the Government's monetarist policies? Does he also appreciate the devastating effect that these measures will have on the building and construction industry? This industry should be providing jobs and new homes, and should be improving those homes which are so badly in need of improvement.
Has the right hon. Gentleman drawn the Treasury's attention to the report of the chief housing officers of Wales, who in a recent report forcefully pointed out that the bulk of Welsh housing will be fit only for slum clearance by the end of this century? Has he also drawn the Treasury's attention to the report of Mid-Glamorgan chief officers, who have graphically illustrated the effect which bad housing is having on health and mortality rates in their county?
Why does not the right hon. Gentleman at least admit that this is local government money which he is holding back? Does not he appreciate that by acting in this way, the Government are destroying local government, which has such a proud record in British history?

Mr. Edwards: By acting in this way I hope to avoid the kind of mid-term corrective action which local authorities rightly resent and which interferes with sensible capital planning. The hon. Gentleman referred to the so-called decorative aspects of my statement. I do not know whether he means the 27 per cent. increase in net provision — that is additional Government grant to local authorities to offset falling receipts—or whether he is criticising the fact that to meet the particular problems of Wales, and in recognition of the Welsh authorities' good record on current spending, Wales has been given about £100 million more than it would have received on the equivalent English per capita basis.

NEW MEMBER

The following Member took and subscribed the Oath:

Michael Denzil Xavier Portillo for Enfield, Southgate.

Local Authority Capital Expenditure

Dr. John Cunningham: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the statement made today on local authority capital expenditure in England and Wales.
I gave you, Mr. Speaker, as well as the House and the Secretary of State, as much notice as I could of my intention to raise this matter. The House has just learned of the contents of those statements which were discussed in a mood of considerable anger and dismay.
These are specific matters of crucial importance to every hon. Member and his constituents. I believe that no one would contest that. That the matter should have urgent consideration is the point that I particularly want to stress. The House listened with increasing dismay to the Secretary of State for the Environment, who made a number of statements which, in effect, were a new departure in policy, even for this Government — first, further to restrict local government control of its own money and resources; secondly, to betray the promises made to owner-occupiers and people buying older premises, particularly young married couples; and, thirdly, to betray commitments given to the building and construction industry. Commitments to the homeless and to people living in substandard accommodation have also been broken as a result of today's statements.
This is an urgent matter because local authorities will have to make immediate changes in their plans and programmes for the coming financial year. They will have to begin immediately to adjust to the new circumstances under which they are expected to operate by the Government. When I say local authorities, I mean not just housing authorities but also the capital programmes of the shire counties.
In view of the overwhelming resentment and anger displayed by the House of Commons following these statements, the House should have the opportunity to discuss the matter as soon as possible, certainly before the Christmas recess. The Secretary of State said—I think I quote his words correctly—that he was operating "under decisions of the House". The House should be given an immediate opportunity to debate the implications of his statement and to record its view before it is too late and before local authority capital expenditure programmes, the building and contruction industry and the homeless are plunged into further problems and difficulties.

Mr. Speaker: The hon. Member for Copeland (Dr. Cunningham) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the statements made today on local authority capital expenditure in England and Wales.
I am satisfied that the matter raised by the hon. Gentleman ought to be discussed under Standing Order No. 10. Has the hon. Gentleman the leave of the House?

[The pleasure of the House having been signified, the motion stood over under Standing Order No. 10 (Adjournment on specific and important matter that should have urgent consideration) until the commencement of public business tomorrow.]

Arts Funding

Mr. Norman Buchan: After the decision which you have just made, Mr. Speaker, I am optimistic but unsure about the position tomorrow if this application is also granted.
I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the cut in funding for the arts for the coming year".
This cut was announced yesterday without warning having been given to the House and without initial notification of it to any of the Opposition parties. It is a specific matter of Government funding to which you, Mr. Speaker, have already agreed in relation to another aspect. It is of general interest to many hundreds of thousands of people outside the House and it is of specific concern to those whose livelihood depends upon the continuation of specific companies and organisations within the arts, both in theatre and music and in the museums and galleries of Great Britain.
Secondly, the importance of this matter has been stressed by many outside who do not normally object to the actions of this Government or of any other Government. Sir Peter Hall, the director of the National Theatre, has described it as a tragic day for the theatre. Sir Michael Levey, the director of the National Gallery, said:
I am appalled and gravely perturbed by the implication of the Minister's decision. … A cut of such magnitude is unprecedented in recent years.
The British Museum has been taken aback by this decision. The chairman of the Arts Council, Sir William Rees-Mogg, said:
Many of our clients, faced with grants increasingly below inflation, will find their very existence in jeopardy".
If that is not enough, when making the statement—not, I may say, in this House—the Minister for the Arts said that the award was "rather mean". It is indeed mean. It is not only mean but serious for those who are concerned with the future of the arts in Great Britain. Because of the anxiety which has been created, because we shall soon be going into recess and because of the lack of opportunity which has been given to the House to discuss the implications, I hope, Mr. Speaker, that you will give sympathetic consideration to this application.

Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the cut in funding for the arts for the coming year".
I have listened with care to what the hon. Member has said, but I regret that I do not consider the matter which he has raised to be appropriate for discussion under Standing Order No. 10. I cannot therefore submit his application to the House.

Later—

Mr. Tony Banks: On a point of order, Mr. Speaker. I fully understood your reasons for not accepting the Standing Order No. 10 application of my hon. Friend the Member for Paisley, South (Mr. Buchan). In your capacity as someone who protects the interests of the House, particularly the interests of Back Benchers,


will you say something helpful about the repeated occurrence of major Government announcements on the arts taking place outside the Chamber? No Minister with responsibility in this Chamber comes to the Dispatch Box to give us the opportunity of perhaps mauling the Minister with responsibility for the arts in much the same way as we were able to maul the Secretary of State for the Environment. You gave way to the application under Standing Order No. 10 on that matter but you were not prepared to give way to the application under Standing Order No. 10 on the arts.

Mr. Speaker: "To give way" is an unfortunate phrase to use. I exercise my discretion in the matter. I fully understand that the arts are important. We have questions on the arts and there has been some discussion of whether sufficient time is given to that. But, if the hon. Gentleman reflects, he will see that he will have opportunities, perhaps before the House rises, to raise the matter.

Mr. Buchan: Further to the point of order of my hon. Friend the Member for Newham, North-West (Mr. Banks), Mr. Speaker. May I make a point that I was unable to make under Standing Order No. 10? On this occasion a separate Department announced its public expenditure for the year. We have just had a lengthy set of exchanges when another Department announced its public expenditure for the year. Yet in the case of the arts, which is dealt with by a separate Department, a written statement is made by a Minister in another place, accompanied by a parallel statement by someone speaking on his behalf in the House. No announcement was made to the House and no warning was given. Nothing would have been known about it had I not phoned the appropriate Department because of a rumour that I heard.
Therefore, it is necessary that the arts, which are profoundly important to many millions of people in Britain, should have their rightful place in the House. I know that this is a monetarist Government but they should not seek to prove themselves to be a philistine Government as well.
I hope that you, Sir, will defend our rights and ensure that that is done. Unless pressure can be brought to bear upon the Government, either by yourself or the House, to come forward with an opportunity in January, we shall have no opportunity to discuss this important statement.

Mr. Speaker: Order. I hope that it is generally accepted in the House that I do my best to protect the rights of the House and its Members. Where statements are made is not a matter for me.

Civil Aviation Bill

Mr. Peter Snape: On a point of order, Mr. Speaker. In Committee this morning on the Civil Aviation Bill the Government, for the second time in a week, failed to carry their own sittings motion. May I take this opportunity—it is the only one I have—to ask the Secretary of State for Transport whether or not he now intends to proceed with the Bill and, if so, when? In doing so, would the Secretary of State bear in mind that it is apparent from the decisions of the Committee at its two previous sittings—

Mr. Speaker: Order. I think I heard the hon. Gentleman say that he was asking the Secretary of State. The hon. Gentleman should be asking me.

Mr. Snape: I beg your pardon, Mr. Speaker. How on earth I could have confused the Secretary of State with you I do not know. May I therefore ask you, Mr. Speaker, whether you have received any intimation from the Secretary of State regarding how the Government intend to proceed with the Bill, since it is apparent from the two sittings of the committee that there is no majority upon it for the Bill as it stands. I and other hon. Members on both the Labour and Liberal benches are entitled to ask what the Government intend to do. I cannot of course speak for the opposition on the Conservative benches.

Mr. Toby Jessel: Further to that point of order, Mr. Speaker. Is not what occurred a failure on the part of the Committee of Selection to reflect the will of the House? [Interruption.]

Mr. Speaker: Order. The hon. Gentleman must not raise a point of order with me about what goes on in the Committee of Selection.

Mr. Jessel: Thank you, Mr. Speaker. Further to that point of order. What remedy is available to the House when the House has decided by a large majority in favour of the Bill on Second Reading—in this case 232 to 154 votes, which is a ratio of 60 to 40 in favour of the Bill — and the Committee of Selection then unknowingly appoints a Committee which is against the Bill? How can the interests of the House be protected?

Mr. John Wilkinson: Further to that point of order, Mr. Speaker. Following the point of order from the hon. Member for West Bromwich, East (Mr. Snape), might it not be for the convenience of the House if one of my right hon. Friends — either the Secretary of State for Transport or the Leader of the House — were to make a statement that the Bill will be withdrawn pending a debate on the Floor of the House about airports policy and pending a decision in the light of that debate by the Secretary of State for Transport, taking into consideration the findings of the airports policy report? If not, will not the Secretary of State be prejudicing his quasi-judicial capacity?

Mr. Alan Haselhurst: Further to that point of order, Mr. Speaker. Is not the difficulty due to the fact that the inspector's report on airports policy was published a few days after the Second Reading in this House and that the Standing Committee is reflecting the resulting confusion that has arisen over the Secretary of State's quasi-judicial position? May I therefore support the


point made by my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) in believing that the right and better course for the House as a whole would be the withdrawal of the Bill at this stage?

Mr. Robert Adley: Further to that point of order, Mr. Speaker. I am not a member of the Committee which is considering the Bill. I voted against its Second Reading. The points which my hon. Friends have made are important. I should have thought that they would be of benefit to the Secretary of State. Certain hon. Members may be uncertain whether the Bill is or is not linked with Stansted. I think that most of those who have studied the matter recognise that it is linked with Stansted and believe that the House ought to drop the Bill until a decision on Stansted has been reached by the Government.

Mr. Peter Shore: Further to that point of order, Mr. Speaker. Surely it is unprecedented for a Standing Committee to fail to approve the sittings motion at two meetings. This in itself is worthy of considerable comment. Is not the truth of the matter that, since the House of Commons gave approval to the Second Reading of the Civil Aviation Bill, certain events have taken place and reports have been published which have led to a fundamental reappraisal of the principle of the Bill? Is it not therefore essential for the Leader of the House and his colleagues to consider whether or not the time has come to withdraw the Bill and introduce more appropriate legislation?

The Secretary of State for Transport (Mr. Nicholas Ridley): Perhaps it might help the House in the difficulty which has been created for it by a Bill which has been given a Second Reading by a large majority, although the Committee appointed to consider it has not yet seen fit to begin its consideration, if I were to seek to make a statement about it either tomorrow or the next day, and

certainly before the House rises for the Christmas recess. The matter requires a certain amount of consideration. I should like to ask for your leave, Mr. Speaker, to make a statement in due course.

Mr. Speaker: I think we should leave the matter there.

ESTIMATES DAY

BILL PRESENTED

MILK (CESSATION OF PRODUCTION) BILL

Mrs. Peggy Fenner, supported by Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Michael Jopling, Mr. Peter Rees and Mr. John MacGregor presented a Bill to provide for payments to be made for the purpose of compensating persons, who are or have been registered in the direct sales register or a wholesale register maintained under the Dairy Produce Quotas Regulations 1984, for discontinuing milk production and to make provision in connection with payments to such persons whenever made: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 46.]

STATUTORY INSTRUMENTS, &c.

Mr. Speaker: By leave of the House, I shall put together the questions on the three motions relating to the statutory instruments.

Ordered,
That the Local Government (Interim Provisions) (Consultation) Regulations 1984 (S.I., 1984, No. 1760) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Agriculture and Horticulture Development (Amendment) (No. 2) Regulations 1984 (S.I., No. 1922) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Farm and Horticulture Development (Amendment) (No. 2) Regulations 1984 (S.I., 1984, No. 1924) be referred to a Standing Committee on Statutory Instruments, &amp;c. —[Mr. Lang.]

Prevention of Fraud (Investments) Act 1958 (Amendment)

Dr. Oonagh McDonald: I beg to move,
That leave be given to bring in a Bill to amend the Prevention of Fraud (Investments) Act 1958 to compensate investors with licensed dealers.
The Bill is directed at licensed dealers in shares, a growing sector of the market in shares. There are, governing licensed dealers, nine associations which constitute self-regulatory bodies.
Last year the Department of Trade and Industry tightened up the regulations governing licensed dealers in shares. Nevertheless, in spite of that the Under-Secretary of State with responsibility for corporate and consumer affairs, admitted to me in recent correspondence that the present statutory framework could be improved and extended and that is what the Bill is about.
For a number of reasons it is necessary to protect investors with licensed dealers in shares against fraud, bankruptcy or mismanagement, by setting up a compensation fund to provide for their losses in those events. It is necessary in this case because the risks that the would-be small investor with licensed dealers in shares can face are many.
First, it is difficult for a recipient of a cold call—an unsolicited telephone call — to know whether the supposed licensed dealer is respectable. Whether he is a member of one of the proper associations and has a licence.
It is also difficult to know in what kind of trading in shares the company engage. There is a danger that a company may take a worthless share at an artificial price and set up a company abroad, say in the United States or on the continent, and push the price up by hiking up the shares in the foreign market. That creates an artificial market in Britain. That is a fraudulent manipulation of shares, yet the practice occurs. It is not clear whether the Department of Trade and Industry investigates and controls such actions rigorously enough.
Let us take Ravendale, for example. That company is owned by Mr. Singh, the second largest licensed dealer in Britain. He forged the transatlantic ties with Marsan Securities, a New York brokerage house, which, as The Observer and the Securities and Exchange Commission subsequently revealed, was a distinctly unsavoury concern. The Federal Bureau of Investigation has expressed great anxiety about trading between Ravendale and Marsan Securities. The Department of Trade and Industry, in a letter to me, claimed to have carried out an investigation, but just how rigorous it was and what form it took remains unclear.
Before Marsan ceased business, it promoted Ravendale sponsored shares and Ravendale, in turn, marketed Marsan favourites. Ravendale's offshoot, the London Venture Capital Market, planned the unlisted securities market placing of shares in Video Turf, owner of the rights to a horse race gaming machine. Camseal, Video Turf's parent, had disturbing associations with individuals connected with Signal Life and the Cavendish Life frauds. In the event, Video Turf never came to market. Camseal collapsed and recently the shares were quoted at a mere 25 cents. They were formerly valued at $30 million.
Other allegations have been made against Mr. Singh and Ravendale by the Checkpoint programme. Those include connections between Mr. Singh and Thomas F. Quinn, a disbarred American lawyer imprisoned for stock fraud. He is believed to have connections with the Mafia.
Chartwell Securities AG, a company with which Thomas F. Quinn appears to be intimately associated, and Zurich and Trafalgar Capital (UK) owned by one Neil Bruckman, appeared to be acting in concert to manipulate a market in shares. Abraham Margolis was a major shareholder in Ravendale Securities. He and his brother, Robbie Margolis, according to the FBI, are associates of the Mafia.
That is just a small part of the complex activities of Ravendale. But to the small investor, as the recent Checkpoint programme showed, it appeared to be a respectable firm of stockbrokers. Such firms advertise in the national press and sometimes the names chosen—for example the London Venture Capital Market — make them seem solid and respectable. They issue glossy brochures, and, as I said, they sometimes contact people cold, which is illegal and entice them to part with their money, sometimes to their loss. The Checkpoint programme recently featured a Mr. Dunstan, a disabled man who has lost all his savings.
The Bill is designed to fill a gap in the legislation by providing a compensation fund for investors with licensed dealers to reimburse them if funds have been lost either because rules have been broken or ignored, because of commercial misjudgment or because the company concerned has collapsed.
The collapse of Norton Warburg in 1981 showed the necessity for compensation. More than 500 investors suddenly discovered that the five companies in which they had invested through Norton Warburg had lost nearly £4·7 million.
The Government are determined to encourage small shareholders even if, as in the case of British Telecom, it means selling shares to them at half price. If that is the Government's aim, they must be prepared to protect small investors in the circumstances that I have described. The tightened rules for licensed dealers introduced in 1983 go part of the way. Even the Gower report points out the necessity for a compensation fund. This part of the market is growing. The privatisation of British Telecom has meant that many small investors have gone to licensed dealers because their investments are too small for a stockbroker's attention. Some licensed dealers have made a killing out of BT shares. One has carried out £18 million worth of trading so far. If that is the position, the associations of licensed dealers should be obliged to set up a compensation fund. It would probably be sensible to have just one association rather than the present nine. Setting up such a fund would not be so prohibitively expensive now as it was in the past due to recent change in the rules, forcing the separation of clients' money and investments from the firms' other money.
If the Government are determined to encourage small investors they must be prepared to ensure that the small investor is properly protected and that the part of the market in which small investors deal is properly regulated and controlled.

Question put and agreed to.

Bill ordered to be brought in by Dr. Oonagh McDonald, Mr. Kevin McNamara, Mr. Robert Hughes, Mr. Stewart


Randall, Mr. Stewart Bell, Mr. Jim Callaghan, Me. Derek Foster, Mr. Frank Dobson, Mr. Harry Cowans, Mr. Jack Straw, Mr. John McWilliam and Mr. Robin Corbett.

PREVENTION OF FRAUD (INVESTMENTS) ACT 1958 (AMENDMENT)

Dr. Oonagh McDonald accordingly presented a Bill to amend the Prevention of Fraud (Investments) Act 1958 to compensate investors with licensed dealers: And the same was read the First time; and ordered to be read a Second time upon Friday 18 January and to be printed. [Bill 47.]

ESTIMATES DAY

[1ST ALLOTTED DAY]—considered

SUPPLEMENTARY ESTIMATES 1984–85

Class IV, Vote 5

Industrial Support (Department of Energy)

Motion made, and Question proposed,
That a supplementary sum not exceeding £45,000,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in the course of payment during the year ending on 31st March 1985 for expenditure by the Department of Energy in connection with the energy industries including related research and development, selective assistance to industry, energy conservation, oil storage, and certain other services including grants in aid and an international subscription. —[Mr. Buchanan-Smith.]

Mr. Ian Lloyd: Last, but not I think least, we come to energy. The Select Committee on Energy and I as its Chairman are grateful to the House and to the Liaison Committee for the opportunity to discuss the issues raised by our report on the £45 million allocated to the financing of BNOC in the winter Supplementary Estimates.
Before dealing with the report, I wish to thank very warmly the members and staff of my Committee for the stupendous efforts that they made to complete and publish a report within 15 days of the decision to make the inquiry. In my view, that very creditable achievement conceals two things. First, we were unable to take evidence, as we would have wished, from a number of other significant witnesses such as the recipients of the letter from my right hon. Friend the Secretary of State. As Chairman of a Select Committee which has always sought to base its conclusions very firmly on the evidence, I believe that that fully justifies our first conclusion—that if the spirit of Standing Order No. 19 is to be observed the Government should not put this kind of pressure on Select Committees. Secondly, the Government have yet again refused to disclose important evidence which in my judgment could have been disclosed without prejudicing commercial confidence. This may limit the report, but I do not believe that it invalidates our conclusions.
Two documents are especially relevant. The first is the Government's letter to the oil companies in August this year. A summary of that document, still marked "confidential", disclosed nothing of interest or importance but in my judgment it is clear that the letter influenced both BNOC and the oil industry's actions. I shall return to that later. The second document, which I requested after my right hon. Friend the Secretary of State had mentioned its existence in his evidence, was a review of oil price policy carried out by the Department. Our Clerk was advised that this was "advice to Ministers" and an "internal working document" and could not be provided.
Technically, Select Committees have power to send for papers and persons, but it seems that our power to send for persons is significantly greater than our power to send for papers. That being so, I believe that the discharge of our responsibility to Parliament and to the nation is becoming seriously deficient in a significant respect. We could have been shown those papers—in confidence, if necessary—


but we have not seen them. They might even have vindicated the Government's position completely, although I doubt it. Certainly I believe that our suspicions will be justified long before the year 2014. My conclusion is, however, that the rule should be redefined to reflect the present reality—in other words, that Select Committees have power to send for persons and for any papers except those which the Government of the day consider too important or sensitive to be disclosed. All Governments would find that convenient and it defines the real limits to our power. It also seriously limits our ability to provide Parliament and the nation with a second opinion on its affairs which has real value and relevance. I believe that that is a matter for the House as a whole.
As regards the issues involved in the report, the inquiry began in April 1983 when my right hon. Friend the Chancellor was Secretary of State for Energy and gave important evidence to us on oil prices. At that time, there was no immediate prospect of BNOC making losses. The memorandum on the subject from the Department of Energy was quite specific. It stated:
Neither B.N.O.C. nor the Government can intervene in the pricing of North Sea oil in defiance of market forces and the underlying changes in the pattern of energy use and consumer behaviour".
The memorandum continued, saying that BNOC would not have to make frequent price changes and that it would build up "long-term relationships" with its customers and agree prices which
reflected their longer-run commitments of interest".
We were told that the Department itself did not make short-term forecasts, disliked and sought to avoid "sharp and sudden changes" in the price of oil, considered that
our interests, overall, were not the same as O.P.E.C.
and argued that price stability in the short term
depends very much on O.P.E.C. agreeing and adhering to restrictive production programmes.
The then Secretary of State confirmed the position in a most important evidence session, the conclusions of which marked the beginning of the present inquiry. I shall mention just three. First, he said:
B.N.O.C. are price-takers, not price-setters … must interpret market signals … and cannot stand in the way of market forces".
Secondly, he said that while seeking "stability" the Government allow the companies
to produce as much as they like
and make no attempt
to control the price".
Thirdly, he said:
it is not the case that I, having any idea or view on what the world price of oil is, seek to try to use B.N.O.C. as an instrument to achieve that price. Nothing like that at all".
What, then, is the reality? The evidence since April 1983, as my Committee and I see it, seems to point in exactly the opposite direction. The Government now derive so much of their revenue — comparatively painlessly to themselves, if not to the final consumer—from oil or from the North sea, that their loud protestations of unconcern about price levels simply do not square with their actions. They are not concerned merely with the suddenness or sharpness of any change in direction. Indeed, they seem to me to be almost obsessed with the consequences of what they fear most, which I would define—and I believe that they would define—as the collapse of the highly artificial price structure inflicted on the world by OPEC at a time when we produced no oil and

had virtually no short-term options open to us. The apparent permanence of that price structure has been converted by that remarkable mechanism, the market, into a worldwide response of immense power and significance. The production of non-OPEC oil has boomed. The North sea has boomed. The Government's tax revenues have boomed.
The figures for tax revenue are noteworthy. For all the years to May 1979, the figure was £970 million. For the period from May 1979 to this year, it was £29 million. The community still pays much the same price as it paid to OPEC. It is the beneficiaries who have changed. Whatever the national interest may be—and it is debatable—no one can deny a vast overlap of interest between the Treasury and OPEC In 1984, the Treasury's tax take from the North sea was £22 billion gross and £16 billion net, after allowing for related imports, interest, dividends and repayments of capital.
The scale of the national dilemma may be gleaned from the fact that in 1983 the trading profits from all United Kingdom companies amounted to £56 billion, of which North sea companies alone accounted for £15·6 billion.
OPEC makes no bones about its views. At this moment it may be making them plain — for all I know — in Geneva. It is we who equivocate about our views. OPEC stated not long ago that its policy was to
regulate and determine oil prices".
It believes in holding prices when demand is falling and in raising them when demand is rising. It believes that the purpose of its oil revenues is to finance the industrial transition and restructuring of its members' economies. It believes that its members would be appalled by a price collapse and must refrain above all from "competition in prices".
The demonstration of those views and that interest has been the steady decline of OPEC output from a peak of over 50 million barrels a day to some 16 million barrels now. OPEC believes that it remains in its interests to sell a small quantity at a higher price rather than a larger quantity at a low price. An OPEC think tank has stated openly:
Competitive discounting has no theoretical floor above the marginal cost of production
and:
Economic recovery will not cause a commensurate increase in oil demand".
The House might be interested to know why that is so. In 1978ߝ81, the energy used per unit of gross domestic product in the OECD area fell by 8 per cent., but the oil component of that energy fell by 24 per cent.
So much for OPEC. I have already summarised what we ourselves have said. What we do, however, is different. Broadly speaking, our policy response to the situation has been twofold. Under the OPEC umbrella we have created a significant domestic oil capacity. Much, but not all, of that capacity is dependent on OPEC price levels. When he was Secretary of State for Energy, my right hon. Friend the Chancellor stated in evidence to us that North sea fields would not go out of business at a low price. He said:
obviously … there is an oil price at which they would not be profitable, but it is a very low price indeed".
That was a most significant statement. The Brown Book itself discloses that the average cost of production of oil in the North sea is in fact $10 a barrel. That judgment was confirmed by a recent analysis supplied by Professors


Kemp and Rose which estimated the development costs for some 23 new oilfields in the North sea with a total reserve of 2·6 billion barrels.
For fields of more than 250 million barrels, the cost would be $6 per barrel. For fields of more than 100 million barrels, the cost would be $7 per barrel. For fields producing over 50 million barrels — the most uneconomic to develop — the cost would be $10 per barrel. Anticipated operating costs are $12 per barrel for the larger fields and $17 for the smaller. The margin, therefore, remains very large. The parties that are interested in those margins are not the oil companies but the Government who tax them, either for development in the middle east, or, in the west, to satisfy the insatiable public expenditure budgets.
The position is summarised in a remarkable table published by Shell for 1982. Of the $62 received from a typical OPEC barrel in western Europe, $52 disappears in Government revenue—$33 to OPEC and $19 to other Governments. For the North sea, as I have said, the proportion is even higher—somewhere between 85 and 90 per cent. at the margin, though the percentage varies with the field and the location.
OPEC stands to lose $7·4 billion for every fall of $1 in the price of a barrel. I have been unable to find out what the United Kingdom figure is, but it is certainly proportionate.
Those are the real forces at work. That is the scene in which, so we were told, in some mystical and undisclosed combination, in a sort of immaculate co-determination, the Government and BNOC strove desperately not to influence the price of oil—which they tell us they have neither the power nor the wish to do—but to achieve that equally mystical objective, stability. Over and over again, the word "stability" appears in the evidence. Both Lord Croham and my right hon. Friend the Minister of State declared that stability is the goal. How does one achieve stability without exercising a direct influence on the market? And how does one exercise that influence without influencing either supply or price? Politicians may know, but, for once, the economists are speechless.
It is clear from BNOC's recent evidence that a deliberate decision was made to hold the BNOC price above the spot market. BNOC feared that the market was misguided, and that it might collapse and never recover. That is OPEC's view. Lord Croham was quite frank. He stated that North sea output levels were a matter for the Government but that BNOC accepted the Government's view that
any sharp fall in oil prices would be detrimental to North Sea development
and that, if prices fell,
other things might collapse".
He added, however, that the European system of price support was designed to keep oil prices
permanently above what is a competitive price".
Made by a former head of the Civil Service, that is a most authoritative statement. It is also very frank. I submit that it defines a reality that is fundamentally different from that which the Government, in their evidence, sought to imply. The reality involved BNOC in supporting the price and the market, created the losses, ensured that BNOC would have to come to Parliament for money and confirmed that it must have acted on instructions from the Government.
In his turn, my right hon. Friend was most disarming. He denied Lord Croham's conclusion. He reminded me

very much of a bishop in a confessional. If he is to be considered human and truthful, he must disclose something. However, he dare not disclose anything of real significance that might totally destroy his authority in the pulpit. My right hon. Friend, too, sheltered behind the shield of "stability" — that overworked and jaded criterion that has concealed the true objectives of every cartel throughout the ages, whether or not it has been supported by a Government. However, my right hon. Friend added that there were "special factors". There always are. What distinguishes a market from a bureaucracy is that the former accepts and responds at once to special factors. The latter dislikes them intensely, attributes them to Machiavellian forces and wishes that they would go away and allow the plan to be fulfilled as if the special factors had never arisen.
What we discovered, and now know, is that the interference did not work. The price continued to fall and the taxpayer had to pick up the bill. Moreover, we suspect that the bill will be larger—much larger—unless a few of the realities which I have outlined are accepted, and quickly. That is the background to what I believe to be my Committee's most central and significant conclusion. Perhaps I might remind the House of its terms. It said:
The Committee believes that the distinction drawn between promoting stability and resistance to market forces is an artificial one. We find it hard to believe from the evidence of the past year or so that the Government has not taken the view that a certain price level for oil is desirable in the national interest and that it attempts to intervene in the market, as any other body with a considerable vested interest would, to secure that price.
On that rests essentially all that follows.
We need a much wider debate than this Estimate allows. The debate should include the future of BNOC and the framework within which it has to operate, whether the national interest as a whole is best served by high or low oil prices, high or low energy prices, the energy development scenarios which might follow one set of oil price policies or the other, and the cost to the west of any formal or informal support of the present OPEC/North sea cartel arrangements.

Mr. Dick Douglas: The hon. Gentleman has mentioned several factors in regard to the Government's policy but has omitted a significant one—the level of output. Does his Committee take a view on the current level of output from the North sea, which is about 2·5 million barrels a day?

Mr. Lloyd: I am sure that my Committee would take a view on the current level of output if it considered the matter. What has impressed us far more is the fundamental change in the composition of the world output of oil, during the past 10 years. OPEC occupied about two thirds of a columnar illustration at the beginning of the decade whereas it now occupies just a little more than the top one third. The North sea is a significant factor in that change but the most significant is the decline of 10 billion barrels a day in world demand and the greater decline of 13 billion barrels a day in OPEC output.
I believe that we have blown the top off this can of complexity, half truths, secret initiatives and economic distortion which is disguised by some of the world's most powerful pressure groups as expressions of unqualified public interest. If, as I believe, the world's oil industry has responded to the OPEC price level by creating—very much to its credit—a massive alternative supply system, we should at least discuss whether and how the nation, or


the west as a whole, is to receive the full benefits of that and whether and to what extent OPEC will react in the short, medium and long term. There is a significant rather than a negligible overlap of interests between us and OPEC. We should also discuss how we can avoid a recurrence of the serious cartel exploitation which occurred in the 1960s and the 1970s. This must be an open and continuing debate. We have established the bridgehead. It is up to the House and the country, if I might put it this way, to follow through with an armoured division of debate and analysis. Nothing less will do.

Mr. Gavin Strang: I am grateful for the opportunity to congratulate the hon. Member for Havant (Mr. Lloyd) on his introduction of his Select Committee's report. Many of us agree that this might not be the most appropriate time to debate that report—it justifies a separate debate. I should like to address myself to the dominant issue in the energy industry with regard to public cost—the current miners' strike.
We are told that the Government's case in the dispute is the need to close uneconomic pits. There are three levels of argument.

Mr. Deputy Speaker (Mr. Harold Walker): Order. I shall be interested to see how the hon. Gentleman relates his speech to the Estimates.

Mr. Strang: I have had advice to the effect that it would be possible to refer to the coal industry in this debate.

Mr. Deputy Speaker: Order. A passing reference is one thing, but choosing the dispute in the coal industry as the theme of a speech is quite another.

Mr. Strang: I am grateful to you, Mr. Deputy Speaker. I shall therefore make a rather modified speech. If you are telling me, Mr. Deputy Speaker, that it is not possible to refer to the coal industry in a debate on the Estimates, I shall take your advice, but that is not the advice that I have been given.
We are talking about public expenditure and the Department of Energy. Oil, gas and coal are crucially important but our most important energy resource is coal. We should therefore concern ourselves with the cost of its production. Bearing in mind the fact that there has not been one special debate on the coal mining strike—

Mr. Deputy Speaker: Order. I have told the hon. Gentleman that it is in order to make a passing reference to the coal industry by way of analogy but he must not make the dispute the theme of his speech. The House is considering Estimates that relate to BNOC and I hope that the hon. Gentleman will direct his remarks to them.

Mr. Strang: Well, I should therefore like to draw a comparison between the case for oil and the case for coal. It is right to consider the level of North sea oil production. As the hon. Member for Havant said, bearing in mind the huge world market for oil, Britain could be considered a factor in determining the world price of oil. As we are concerned about the economics of oil production as opposed to other forms of energy, it is right to examine the costs involved. I hope that it will be possible for me to refer in passing to the cost of coal production.

Mr. Deputy Speaker: Order. I think that the hon. Gentleman and I have different opinions about what he may refer to. I hope that he will have regard to what I have already told him at least twice.

Mr. Strang: I am grateful to you, Mr. Deputy Speaker. It seems that the earlier advice which I received from a good source—

Mr. Deputy Speaker: Order. There are many seats in this place but there is only one Chair.

Mr. Strang: I am happy to make it absolutely clear that in no way am I challenging your judgment, Mr. Deputy Speaker. For that reason I shall conclude by saying that the case for oil is strong but oil must be considered in the overall context of energy production and supply. It is nonsense to debate these issues without taking account of the fundamental economic and social costs. I make that point without considering just one commodity of production. Whether talking about oil or gas production, or any form of energy production, we must recognise that the economic costs differ. That is a crucial argument to consider not only in an energy debate on North sea oil but in an economic debate in general.
We often do not recognise that the accountancy value of one aspect of production differs greatly from the economic value in terms of fixed overhead costs, fixed costs for pension schemes and, above all, social costs and consequences. Whether discussing North sea oil—this morning the Minister of State spoke about North sea oil in the Scottish Grand Committee—or other sources of energy production, the tragedy is that we are not giving sufficient weight to the huge amount of social damage that occurs as a consequence of mass unemployment in many of our communities.

Mr. David Howell: The House will wish to congratulate my hon. Friend the Member for Havant (Mr. Lloyd) and all the members of the Select Committee on Energy on a remarkably lucid report, produced with great speed and efficiency. I warmly join in those congratulations. I intervene in this debate with some hesitation because I am not a member of that Committee, but I should like to direct the attention of my right hon. Friend the Minister of State to certain points.
I shall consider the genesis of the British National Oil Corporation, which is entirely a trading body, trading in crude oil. When the Government decided to keep the BNOC trading arm as a separate body, it was not originally intended that it should become an instrument for shaping North sea oil prices, let alone for establishing an official British North sea oil price. BNOC was kept on at the time it was decided to split the original corporation and to prepare for privatisation — the upstream exploration development production division which subsequently became Britoil—to ensure security of supply. It was thought that that would be the simplest way of establishing security of supply. It was argued — perhaps that argument seems a little remote now — that it was essential to have an instrument which would work and be acceptable and which, if there were a third oil shock and another huge interruption in oil supplies internationally, could assure supplies from British producers to British consumers and the refineries. Some argued that security of supply could be achieved in another way, and a great


deal of debate has occurred on that subject. There are difficulties associated with the EEC and the treaty of Rome.
I have wished all along that there should be no such organisation to fix prices, and even today I do not believe that it would be wise to have a body that appears to be the source of an official price or even a single price which people the world over, including OPEC leaders, see as an official price. I believe that we should have adhered closely to that view. In considering participation agreements and the purchasing and selling of large volumes of crude oil, BNOC should be a price taker and not a price giver or maker. That fact should be clearly established in international oil markets and understood, especially by Governments of other oil-producing countries.
The reason we were so worried about the danger that could occur was obvious. If it became apparent that Britain had an official oil price, it would follow that that price could be manipulated. We feared that people would come to London saying, "Why do not the British Government do something about the official oil price, because that would help us with other manipulations on the world market?" Events have justified that fear, because that is exactly what has happened. It is ironic that one of the greatest free-world oil producers, the United States — admittedly, not a vast exporter, but nevertheless a huge producer and therefore decisive in the world oil market — has no national oil corporation. It therefore is not lambasted, squeezed and pushed by the world's oil diplomats in the alleged interests of maintaining price stability. We envisaged that danger.
BNOC's involvement with prices has not evolved in the way originally intended. That would be a sufficient danger, but we seem to face an even greater danger. It is believed that BNOC should not only be concerned with shaping North sea prices but take up a positive position in response to consultation with Government about stabilising the world crude oil price. That bold first step is fraught with danger, and I say that not with hindsight but because I have believed it for a long time.
The Select Committee has already sought to elucidate how the consultation—I put it no more strongly than that—was arranged, so that BNOC, whose officials are familiar with the world market and, given the circumstances in which they operate, have conducted themselves with extreme skill, felt compelled to move further into the vast world of oil pricing to take up an active position to stabilise world oil prices. That is what BNOC appeared to do in the summer. Obviously, my right hon. Friend the Minister of State will explain what really happened but that appeared to be the Government's requirement of BNOC. That function differed from the originally correct purpose and function of BNOC.
It would be unwise if BNOC has not only become generally involved in price shaping of North sea crude oil prices but tried to take a stance on price fixing in world oil markets. The reasons why that is unwise are obvious. It will not work. Obviously, British oil production is only a tiny proportion of world oil production. Vast forces and trends are at work in the world oil market which, frankly, ride right over and stand well away from anything that can be done with North sea prices or volumes. The oil markets worldwide have, for 100 years, barring only the gap of the past 14 years, faced the fact that there is too much oil.
For at least 18 months or two years, it has been certain that there would be a continuing softening of oil prices as attempts by the OPEC cartel to maintain the extremely high political and artificial levels of the early 1980s were progressively weakened. I do not believe that that will lead to a collapse in oil prices, but I believe that we shall see the operation of the type of forces that operated at the end of the 1970s. In those days, oil was priced at between $12 and $14 a barrel. Grossing that figure for inflation since then, the price per barrel would be about $25—probably $3 or $4 below the present price.
It has been widely expected by those who try to watch the oil markets that the price would move in that direction. It was optimistic at best and imprudent at worst for BNOC to try to prevent that happening. Any move winch might, at first, lead to trying to hang on to a price and then have to give way gives one the worst of all worlds. It would be worse than doing nothing in the first place. It is a great pity if that is the sequence of events.
That is the first reason why it was not the best thing for BNOC, on the basis of consultation, to try to move into the sphere of world oil prices. It was not going to work.
The second reason is that BNOC was bound to lose money. That view was widely held and it is what has happened. I understand that the loss is at the rate of £15 million a month, and that is also a pity. I join the Select Committee in urging careful thought before any further developments are allowed which will lead to further losses of that size.
The third reason has to do with international diplomacy. For BNOC to get into a posture where it might give the impression, or in which my right hon. and hon. Friends might give the impression, that they could do something decisively to influence oil prices was dangerous, because they cannot. Except in the short term, that cannot be done. A friend refused may be a friend annoyed, but a friend misled is an angry friend. It does not surprise me that harsh words have come from OPEC about North sea price changes being ill-judged and ill-timed, the more so because OPEC leaders have claimed—I do not know whether this is only a claim or whether there is more substance to it—that they were under the impression that something could be done to hold the price and that it would be held, when of course it could not be and was not.
The Government's policy does not seem—it would not be wise—to be to control the volume of North sea oil production. The Varley assurances given by the former right hon. Member for Chesterfield have been extended, and the successful regime which we run in the North sea is one in which there has been an understanding that there will be no direct interference with production.
Any impression that may have been given—I hope that it was not—that we could and would influence the price, was a mistake. That would have led to worse relations with the Arab OPEC countries than if there had been a candid explanation at the outset that we had no control over the volume or price of North sea oil, and that we were price takers and not price givers. I always tried for candour with the Arab countries when I was involved with these matters in government.
The fourth reason why price influencing is a dangerous and unwise matter to become involved in, is that it is not entirely in our interests for oil prices to stay locked at the $29 range for Arab light or $30 for North sea crudes. I agree with those who say that, if the price collapsed to $10 or $15, it would create great international instability and


considerable problems for this country, but modest falls to the price at which I believe it will settle—the $25 range — would do no harm to this nation or European economies. As he watches the American growth rate ease a little in 1984–85, Mr. Paul Volcker urges western Europe's economies, I believe rightly, to go for some kind of boost. There could be no better boost and no healthier development for European economies, including this country's exports and jobs, than a modest drop in crude oil prices to about $25. That assumes, of course, that the dollar does not collapse. I know that that is a bold assumption, but it is one with which we must work for the time being.
Even if we had the power to do so, which it turns out we do not, there is no broad economic argument in favour of trying to stabilise oil prices in the national interest at the artificially high levels which prevailed until the summer and early autumn of this year.
The argument on the other side is the one that comes through in some of the examinations that the Select Committee has conducted so assiduously and it is heard in a number of discussions about oil prices outside the House. It is that, if the BNOC trading body in London does not intervene in some way in oil pricing, there will be a world collapse of oil prices. That is what the OPEC Ministers say, but they would say that, wouldn't they? We must see through some of the observations, which are part of an understandable attempt to preserve certain interests, about what would cause a collapse in oil prices.
There is still a strong underlying demand for crude oil on the world market. It is not as strong as it was in the late 1970's because of the large increase in conservation and the way that energy has been designed out of a vast range of products. A sensible judgement would point to the oil price stabilising, as I said earlier, at about the mid-20s for the dollar price of oil. We should not be bluffed by the fear that there will be a collapse in oil prices. We should concentrate instead on North sea oil production and pricing, in our own interests.
There are those who say that it is easy to talk about that, but that we must consider Treasury revenues, and remember that they are essential to the Government's overall medium-term financial strategy, and to the Chancellor to enable him to find room for tax cuts or other job creation measures. That, of course, is a separate debate and not one for the House this afternoon.
I had the opportunity to tell the House two or three weeks ago that it was my view that the Chancellor's £1·5 billion available for next year could be within the range of £3 billion or more, not least because of the dollar oil revenues, and because I happen to believe that he has more room within the medium-term financial strategy than previously revealed.
That view has now been confirmed by a series of Treasury leaks over the weekend. We have now all been informed that £3 billion is more likely to be available for tax cuts, national insurance contribution cuts, and help for community enterprise and so on. I welcome that. I see a real prospect for a vigorous assault on unemployment in the new labour market conditions coming in the spring, partly financed by oil revenues.
Most of those revenues are already in the pipeline, by virtue of the 1984 production. I do not believe that fears about the oil price slipping from $30 to $27 or $26 for

North sea oil or from $29 to $25 for Arab light would endanger that strategy in any way. If anything, it might enhance the strategy because it would lead to accelerated economic growth in Europe generally, including Great Britain, which would raise tax revenues and provide even more room for the Chancellor to operate in. None of those dangers stands up.
The worries that have led to the view that it would be in some way terrible if BNOC did not involve itself in trying to stabilise world prices are unfounded. There is one danger only which might lead to a major oil price collapse —if BNOC tried desperately to hang on to the existing oil price and then found, as it has already found to some extent, that it could not do so and that it did not work. That would infuriate—it may already have done so—other OPEC producers. In the end the attempt must be abandoned, BNOC must give way, and the position is more unstable and destabilised than it would have been if BNOC had not involved itself in the first place.
I understand the difficulties facing my right hon. and hon. Friends about having a British national oil corporation which must enter into price negotiations, and about having to explain to OPEC leaders and other world oil producers that we have no official price.

Mr. Ted Rowlands: The right hon. Gentleman has not mentioned in his list of consequences the effect of a $25 price on the pound. I mention that neutrally.

Mr. Howell: A good deal of the effect has been discounted. One must consider the relationship between the dollar, the pound, the deutschmark and the yen. The pound may come down in relation to the deutschmark and the yen, which would be a good thing and would make it more favourable for us to join the European monetary system. The dollar would not make much difference to us. I expect that the dollar will come down a little and that the pound will come down with it, but that the deutschmark and yen will strengthen. Because the oil world believes that the price will be $25, most of that has been discounted.
I understand the Government's difficulties and the desire of BNOC not to appear to be in the lead in terms of raising prices, which was the problem two or three years ago when I was involved in the matter, or setting the pace in a vicious spiral of collapse. That is threatened by OPEC, but I do not believe that it is a serious danger. That leads me to the conclusions to which the Select Committee was heading in its lucid report.
If BNOC is to continue as an organisation, it should stick to the simplest rule of pricing. That is, it should try to buy and establish contracts as near as possible to prevailing spot market prices that month and to sell them at the same price, instead of getting caught in elaborate contracts as a buyer and having to sell on spot markets when those to whom it was to sell, walk away. It would be wise for the Government, having learned their lesson, to stand well back from consultations that lead to BNOC doing things in an attempt to influence world oil market prices, which would not and could not work and which would be bound to lose it money and friends. We should return to a matter which I pressed when I was a member of the Government and which I have raised since: that is, we should see whether we can get our security of supply by completely different arrangements, and do away with BNOC.

Mr. Malcolm Bruce: I congratulate the Select Committee on Energy on its report, which has raised an important question. As the Chairman of that Committee, the hon. Member for Havant (Mr. Lloyd), said, the question needs to be more widely discussed than the debate can allow. We are debating the most important, dynamic element in the British economy, yet we identify a significant flaw in the Government's attitude towards it. To put it more strongly, the Government do not have a clear idea what their policy is. I suspect that people working at the British National Oil Corporation have even less idea what the Government's policy is and are being left in confusion about what is being expected of them.
The point at issue is the consequence of what no hon. Member believes is anything less than Government intervention in an affair, in which the Government publicly stated they were not intervening. The Government's view was that BNOC acted at arm's length. However, it is obvious that the Government made it clear to BNOC that they wanted it to hold the price, presumably because maintaining a high price would produce a high revenue, which was crucial to their overall financial strategy.
If that is the Government's policy, they should have the honesty to admit it. They should make it clear that that is their objective. Even if it is their policy, it is not clear whether it is workable. This Government of all Governments claim to believe in the forces of the market, yet they have chosen to intervene. The consequence of that is our presence here to debate the £45 million subvention.
I wonder what Britain's real interests are. As the hon. Member for Havant said, before we discovered North sea oil we were sure that neither OPEC nor high oil prices were a good thing. Since we have become a significant oil producer, we have slipped into thinking—it is perhaps understandable — that high oil prices are to our advantage. However, we have not debated that openly and cleanly, or considered all the options, or whether there are intermediate options. We have effectively moved to the position in which the Government seek to maintain as high an oil price as possible to maximise their revenue.
The Government are not, for example, giving people in Britain who use oil any comparable advantage. On the contrary, people in the market for oil can often buy it more cheaply outside the United Kingdom than inside. Do the Government believe it fair and proper not only to fix the price of oil at the highest level to maximise revenues but, as a consequence of that, to secure a relatively high exchange rate? Industries that are affected by that get no corresponding benefits from the fact that we produce our own oil. We are no better off than if we bought North sea oil directly from OPEC. If the Government believe in the economics of the market, and as it is obvious that North sea oil does not cost anything like $30 a barrel to produce, why are we plugging ourselves into a cartel which we first opposed and them claimed not to have membership of or even direct interest in? In reality it is obvious that we are hanging in there closely.
Given the importance of the issue, the size of the sums involved and the vast quantities of oil that we produce, the matter should not simply be debated for three hours late on an afternoon before Christmas. The issue relates to the

core of the managment of our biggest single national asset. The debate should not end today, but should start today and be extended hereafter.
Some members of BNOC staff may wish me to stress that two thirds of the oil that they trade is traded under participation agreements, for which there are long-term contractual arrangements that causes problems when the spot market expands and the spot market price falls. BNOC staff members have been able to deal independently as dealers on the spot market and although it would be an exaggeration to suggest that £500,000 from a £7 billion deal was an extreme profit, it is better than the £45 million loss on the remaining two thirds. That suggests that there is commercial ability in BNOC. I was going to say that BNOC lacks direction, but perhaps it does not know in which direction to move or from which direction the next instruction is likely to come. That leads to confusion.
The other factor that has arisen from the report, and which was touched on, is the anomaly that apparently exists within the British method of taxation—the so-called spinner. It enables oil companies to sell British oil and to obtain a tax benefit from so doing. It has reached such a stage that the tax rules relating to oil companies trading in North sea oil—what I might call British oil—are known as the plug hole or the sink. If an oil company is left with excessive quantities of several sorts of crude oil, it gets rid of North sea oil first because of the tax advantage. That puts further pressure on the price and causes more confusion in the market—confusion that must be to the disadvantage of Britain in general and especially to the Chancellor of the Exchequer, who, if he changed the rules, would not be accused so much of interfering in the market place and might get sonic revenue that he is currently foregoing.
I hope that the Minister of State will say whether the Government will consider doing something about the tax rules. They confuse everyone at present. They are confusing to those who take some interest in such matters, but to anyone who has no connection with the oil business, it looks like an unmitigated shambles that lacks proper direction. The Select Committee showed that there appears to be a Government policy, although it may be ill-advised and has not yet been declared. To the extent that a policy has been declared, it would appear to be opposite to what has happened.
The Government should come clean and explain to a much wider public than the few who might have a specialised interest in North sea oil what their objective is. What are we trying to do with our North sea oil assets? Is it simply a matter of getting them out as fast as possible, and trying to hold the price as high as possible to maximise short-term revenue so as to sustain the public sector borrowing requirement and our financial strategy, or do we have an industrial objective to ensure that we get some benefit from being a major oil producer and give ourselves some competitive advantage to ensure that we build an energy industry on the strength of our oil industry? Will there be some recognition that having a petro-currency has many unforeseen effects on our exchange rates?
Recently some paper industry manufacturers told me that the Bowater project that was scrapped about three years ago when the pound was worth $2·20 would have been viable had the pound been worth $1·75. Hon. Members will appreciate that the project would have made money hand over fist with the current rate of exchange at


$1·17 or $1·18. The Government appear to be interested in achieving stability in the oil price, but they have abdicated all responsibility for stability in the exchange rates, which affect many industries that have no conception of the link between the pound as a petrocurrency, Britain's overall trading position and the general mysteries of free exchange rates.
The right hon. Member for Guildford (Mr. Howell) estimated what would happen to exchange rates. He might be right; I might be right; anyone might be right. The experience of the past two or three years suggests that it will be difficult to predict or plan in those circumstances. If the Government's policy is to achieve stability in oil prices to the extent that the market will allow, the Minister must make it clear how will they relate that to their professed belief in allowing the market to operate freely and in accepting no responsibility for securing stability of the exchange rate. As yet, for reasons which I understand, although I am not sure that we have obtained the right benefits, Britain has not joined the European monetary system.
The Select Committee has provided a useful service in drawing this matter to our attention. I question whether we should approve the subvention, which has been introduced only because the Government appear to be pursuing a policy that is in direct contravention of their stated objective. The Government must not believe that they can continue in that vein, return to the House, after another period of falling prices, and expect the House cheerfully to cough up so much money. They will get a more hostile reception than they have today.

Mr. Peter Rost: I am pleased to follow the hon. Member for Gordon (Mr. Bruce) because, although he is not a member of the Select Committee, which is a loss to us, I enjoyed his perceptive analysis of what has worried the Committee. May I express my gratitude to my hon. Friend the Member for Havant (Mr. Lloyd) for his inspired work as Chairman of the Committee and for his dedication to the job.
The Select Committee concluded that the British National Oil Corporation has become engaged in a creeping transformation, undeclared by the Government. As my right hon. Friend the Member for Guildford (Mr. Howell) so brilliantly said a few moments ago, BNOC was created with the primary objective of maintaining security of oil supplies for Britain at a time when there were shortages, political disruption and steeply rising prices. But without any redirection of policy by the Government, BNOC has been quietly instructed not to secure supply —that is unnecessary at a time of glut and falling prices —but to secure prices. Yet there has been a reluctance to admit that fundamental change in Government policy.
I am reminded of the long Committee debates in which some of us participated during the passing of the Oil and Gas Enterprise Bill in February and subsequent months in 1982. My right hon. Friend the then Secretary of State for Energy, who is now our distinguished Chancellor of the Exchequer, said:
The trading corporation will exist for the specific purpose of security of national oil supplies."—[Official Report, Standing Committee E, 25 February 1982; c. 631.]
We had lengthy discussions in Committee and we were considerably enlightened by my hon. Friend the Member

for Bedfordshire, North (Mr. Skeet), who expressed grave anxiety that the British National Oil Corporation was not being hived off or privatised. He believed that there was some doubt as to whether the corporation performed a useful function. He was not given the credit at the time for the amendments that he moved to try to enact the privatisation of the corporation, which were of course resisted by the Government. Nor was he given credit for his profound prognostications at the time.
I did not know that my hon. Friend would be in the Chamber today, and I hope that he is not embarrassed by this, but I shall quote what he said in Committee:
I should not be surprised if the oil price fell further, to below $30 a barrel."—[Official Report, Standing Committee E, 11 February 1982; c. 167.]
At the time it was $34 a barrel, and on that basis my hon. Friend argued that there would be a serious impact on the role of BNOC if that trading company were faced with a declining market, difficult trading conditions and the losses that would result.
The Committee's inquiry clearly shows that that is exactly what has happened. There has been a clear change of policy by Government, but a refusal to admit it. Security in a time of glut is an irrelevance, and in any case we have the powers under the Energy Act 1976 to deal with crises. We have the right to buy 51 per cent. without BNOC if we ever needed to exercise that right. We should be curiously questioning why we have to exercise that right to purchase 51 per cent. through Government agencies when we do not need security of supply.
If the policy is to maintain the price of oil, the Government should say so. Why should it not be their policy? It is not a policy of which we need to be ashamed. After all, the Government have declared their policy in many other sectors of the economy where they believe that it is desirable to maintain prices well above market levels, and we accept that. For example, the Government support the airline cartel to maintain airline prices well above the market level, to protect international and national carriers. We may or may not agree that that is a good thing, but that is what happens and the Government admit it.
The Government maintain a coal cartel by subsidising by over £1 billion a year, an industry that produces coal that costs over 50 per cent. above world prices, and the aim is to protect the British coal industry. Some may dispute that policy, but it is accepted and admitted by the Government as official policy.
If my right hon. Friend the Minister of State, Department of Energy, who will be replying to the debate, wants a third example of where the Government are honest enough to admit maintaining prices above market levels, there is agriculture. The Government support a food cartel so that our food prices are well above world prices, and this is done to support our agriculture through the CAP. If we can accept Government policy that is believed to be in the national interests in other spheres of our economy, why do we not also accept that, if it is in the national interest to support the price of oil, we should do so? It would be a respectable argument, but the trouble is that we have not yet heard it, and that is what concerned the Committee.
I shall not be presumptuous enough to suggest whether it is in the national interest that we maintain the world price of oil or whether we would be better off if we allowed it to fall. We know that a decline in oil prices would help British industry and consumers, but it would not help the


pound, the public sector borrowing requirement or the Treasury. It might even endanger the viability of North sea investment. On the other hand, world trade would grow and we would benefit from that.
However, the Government's argument is that they would not be too happy about a price fall because our competitors, who do not produce oil, would benefit more from the price fall than we would. In particular, Japan, Germany, France and the United States would all stand to gain a great deal more than we would from a substantial reduction in world oil prices. Whatever the arguments, and they have been ably put by my right hon. Friend the Member for Guildford, let us at least hear them from the Government. Let it be spelt out — tonight I hope—whether it is in the national interest that we try to sustain the world price of oil and play what role we can in doing so. We should not hide behind BNOC, pretending that we believe in a free market, while authorising that company to try to support the market.
This leads to my principal doubt about the wisdom of the Government's policy towards BNOC, because if it is the Government's declared policy to try to stabilise the price of oil in the national interest, is not the present method of doing it through BNOC the worst possible way to try to achieve that? I should like an answer on this tonight. BNOC has maintained the stability of the oil price by buying oil at fixed prices off the oil companies and immediately selling it on the Spot Market in Rotterdam. Far from having stabilised the price, this may have contributed to a more rapid decline. As the chief executive of BNOC, Mr. Ian Goskirk, succinctly told the Select Committee when it questioned him:
We cannot stand in the way of market forces.
However, it is clear that that is what the Government have asked BNOC to do.
Has BNOC helped by trying to stand in the way of market forces? Have not its market operations contributed to the fall in prices? Have not BNOC's forced sales on the spot market—it has no reserves in which to hold stocks and has to sell oil stocks as it gets them—become a major factor in the Rotterdam market becoming the price setter rather then the marginal market that it used to be? If the Government want to try to stabilise the price of oil, would they not be more honest to say so and to co-operate openly with OPEC, or even join it? At least we would then know where we are. Afer all, our interests are very much in line with those of OPEC. Government policy would be much more likely to succeed if we actually joined or cooperated more actively.
If the Government are not going to do that, but they wish to make an impact on stabilising the oil prices, they should at least agree to production quotas. That might at least make a useful contribution, as the way that BNOC is trying to influence the market has probably had the reverse effect. Instead of stuffing the Rotterdam spot market with oil as a distress seller, BNOC might have influenced the market more if it had operated in reverse and had bought from the Rotterdam stock market and then sold the oil to the oil companies that were short of crude. I doubt whether BNOC losses would have been greater if it had tried to do that, and it might have had a more beneficial effect on the market.
If the Government wish BNOC to play a role in influencing the market, they have to give BNOC enough muscle to be able to do so. In other words, they must allow it to have the resources with which to hold oil prices, as

multinational oil companies do, so that it can operate with a little more flexibility and manoeuvrability than it does now. However, the present obscurity of the Government's stance is unsatisfactory, and I hope that it will not last beyond this evening.
BNOC could be scrapped because it no longer has a useful function, is not required to maintain security of supply and cannot control the market. That would allow the free market to find its own level and allow the oil companies to market their own oil, which they might be able to do without disturbing the market any more than BNOC does. If the Government do not want to take that line, they must outline an effective policy for practical intervention, which perhaps means curtailing production, using BNOC as a market buffer or collaborating more openly with OPEC. They have to take one course or the other, and at the moment we are stuck in the middle.
I hope that, by the end of this debate, the Government will be able to clarify what they believe is in the best national interest. Is it to try to maintain the price of oil, or to allow it to fall? Or do they believe that either course is in the best national interest? Whatever the reason, let the Government outline how they propose to pursue that policy more sensibly than they have so far by using BNOC as a front for policies which they have been incapable of implementing effectively.

Mr. Kevin Barron: I thank the chairman of the Select Committee, the hon. Member for Havant (Mr. Lloyd) for putting so well the Committee's findings on the winter Estimates. The House should consider the Committee's first recommendation. The winter Estimates do not have to be approved until February and yet the Committee had only three weeks to complete its inquiry before it had to come to the House. It is nonsense to have this debate at this time when the Committee could have considered the Estimates in more detail, and have taken more evidence.
I am a member of the Committee and I should have liked to have had the time to ask the Treasury about the implications of the Estimates. I should have liked to ask Treasury Ministers about the British National Oil Corporation.
As the Chairman of the Committee said, we found it easier to summon people than papers. We made several attempts to see a letter sent by the Minister to oil companies in August. Eventually, we got hold of 80 per cent. of the letter. Some remarks in it were missing. I told the Committee that I had already read 90 per cent. of the letter in the newspapers way back in August. It would have been helpful if the entire letter had been shown to us. It is nonsense that we should have had to struggle to obtain information about Estimates of this size.
In the brief time at our disposal we investigated the BNOC's role. Its first role seems to be to maintain supply. At a time of surplus and with a glut in the world energy market, it might seem to some hon. Members that that is not necessarily right. But I believe that it is essential that such an organisation is able to supply us with oil. In the 1960s and 1970s the position was different. Oil was tight on the world market and we could not maintain supply.
The middle east is unstable and OPEC countries are not able to guarantee supplying the world energy market for


as long as six months, even at a time of surplus. War and other events could mean that we definitely need BNOC's right to 51 per cent. of production in British waters.
The Select Committee asked the Minister about prices and he replied in a forthright manner:
Mr. Buchanan-Smith: Thank you. The first point I would make is that neither my Department nor myself set North Sea oil prices.
That is a definite statement which no one can misinterpret. The Minister went on:
The BNOC has certain functions in relation to the participation agreements and setting its contract prices, and in doing so it forms its own judgment of the market situation, and also consults with my Department, and on occasion with myself, as to what the different factors are that should be taken into account before it sets any particular price.
In all innocence, no one could say that the Department does not have some influence on the setting of North sea oil prices. In the short time that the Committee had, it tried to get to the back of that influence and to find out what had been going on in the last six months.
The Minister has had a few days to reflect and he should tell us his Department's exact involvement. He has admitted that the Department is involved in the setting of prices. That should be debated in the House more fully. All hon. Members should know what is going on.
The Select Committee recommended that no more Supplementary Estimates should go to the BNOC until we are satisfied with the Department's involvement. That is not unreasonable. I do not favour voting against the Estimates if it is in the nation's interest to give public money for the North sea. However, we must know why we give the money and what has happened in the last six months. Against the wishes of many Government Members, because of their ideological stance on the free market economy, we are giving £45 million to private companies. Once that money leaves the BNOC it goes to private interests in the North sea. We should know exactly why £45 million of taxpayers's money should go to private offshore companies operating in British waters.
We must have some answers. How will the Minister ensure that we are informed? How do the Government view contract prices and BNOC's role in them? The Select Committee asked whether contract prices should be changed from three months to one month. I understand that that happens in Norway. Such a change could move contract prices closer to spot prices. The evidence to the Select Committee shows that the spot prices are as near as dammit to the average market price for oil. The three month contract price through BNOC has been higher for some time. Perhaps we should come nearer to the spot price because that seems sensible in terms of the cost of oil to Britain. The spot price share of the total oil market has risen in the past 10 years from 1 per cent. to 40 per cent. and it may not be long before the majority of oil sold on the open market is sold at the spot price.
What are the implications of paying £45 million into the BNOC? I assume that this is being done to maintain spot prices. I understand that tax revenues from North sea oil accrue from the spot price in any event. If £45 million is used to maintain spot price, the Treasury will benefit from the tax revenue. Is there a direct relationship between every £1 million that is used to keep up the spot price and the revenue so derived that is received by the Treasury? We were told in evidence that it would be in the national

interest to grant the Supplementary Estimate to BNOC this winter and we should, therefore, know the exact nature of the national interest and whether the Treasury has been receiving revenue. If the Treasury has not accrued the revenue that was expected, there has been a net loss to the national interest. It is important that we ascertain whether that has happened.
It is predicted that there will be a fall in the price of oil. That will have a dramatic effect on Britain if the fall is significant. We have heard about the billions of pounds that the Treasury is receiving in the form of oil revenue. These moneys are used in various areas of the economy. If the moneys were lost, the effect on the United Kingdom economy would be catastrophic.
What would happen if we lowered the price of North sea oil to the spot price? What effect would that have on the revenue that is received by the Treasury and used thereafter to finance the welfare state, for example? Massive sums are received annually from North sea oil revenue and I want to know what will happen if there is a further fall in the price of that oil.

Mr. T. H. H. Skeet: I am grateful to my hon. Friend the Member for Erewash (Mr. Rost) for his kind of observations. I think that I should be fair to the British National Oil Corporation and acknowledge that it was profitable for at least part of 1984. If blame is to be levelled, it should be levelled at my right hon. Friend the Minister of State, and I say that with much regret.
The price of oil collapsed in July 1984. I tabled a question for written answer on 16 July 1984. I asked my right hon. Friend the Secretary of State for Energy
whether he proposes to give the British National Oil Corporation a specific direction on price for North sea crudes in view of the decline in spot prices.
His answer was:
No. The prices of United Kingdom North sea crudes are governed by market forces and established by negotiation between BNOC and its customers and suppliers."—[Official Report, 16 July 1984; Vol. 64, c.67.]
My right hon. Friend stated in evidence to the Select Committee—this is to be found at page 44—
The spot market is normally the more acccurate reflection of the market price at that moment of time.
That must be set against the colossal loss of £45 million by BNOC which eventually will have to be paid.
It can be argued that one of the first objectives of BNOC was to trade profitably. In 1983, the company made a profit of about half a million pounds on a turnover of about £7 billion, which is a profit of only 0.007 per cent. on turnover. Unfortunately, that was followed by a loss of £45 million in 1984. The corporation is not permitted by statute to act commercially.
At page 35 of the evidence, Lord Croham said:
The framework which was agreed by Parliament makes it almost impossible for us to earn a profit on the great bulk of our transactions.
What is the use of blaming a corporation for bad results when it is working in an economic straitjacket? By mid-September 1984 the corporation was contractually committed to losses in excess of the value of its assets. If it had been a private concern, it would have been bankrupt. But for the state subsidy that was paid into it, nothing more could occur. We are resigned to the fact that £45 billion must be paid under section 6 of the Oil and Gas (Enterprise) Act 1982. As grants under that section may


be made subject to such conditions as the Secretary of State for Energy, with the approval of the Treasury, may determine, what conditions are to be laid down?
The next objective of the state corporation is that it should receive the maximum benefit from the oil that is available, and that is normally expressed in terms of price. The Government are naturally interested in high prices. As my hon. Friend the Member for Havant (Mr. Lloyd) said, North sea oil is a high-cost commodity. Prices range from anything between $6 a barrel to $20. I echo his anxiety about the threats of OPEC. Saudi Arabia's range of production costs is between 35 cents and 50 cents a barrel. That is almost basic and Saudi Arabia can reduce its prices significantly without injuring its own production. Oil is overpriced in the market and the revenue from North sea oil is such that the Treasury dominates the issue. The price of North sea oil is kept high to provide revenue. This is understood fully when it is recognised that the tax take on North sea oil for the five years between May 1979 and October 1984 was no less than £35 billion.
I direct myself to what is probably the most interesting part of the issue, and this is where I affix liability on the Government. They talk about consultations with BNOC, but the corporation is simply a negotiating front. The Government control the corporation while standing in the shallows. At page 15 of the evidence, Lord Croham said:
we do not get details of the information available to the Government. We do get a Government's judgment as far as the national interest is concerned. We agree with Government judgments. It is their judgment, not ours.
There are an enormous number of factors which have nothing to do with BNOC. Let us consider them. There is United Kingdom standing in Saudi Arabia, which is a matter of great importance. There is the effect of pricing on world financial institutions. The indebtedness of Group 77 is of prime importance. The momentum of development in the North sea, the amount of investment and the fear of plunging prices are similarly critical issues. There are many other factors but I shall not refer to them now. These are matters for the Government and not for BNOC.
It is rather extraordinary that there are other factors that may induce the Secretary of State to reach his own decision and simply instruct BNOC what to do. Her Majesty's Government have the right to give a specific directive to BNOC, whenever they like, on a particular matter, including pricing, under section 4(1) of the Petroleum and Submarine Pipe-lines Act 1975. When Dr. Otaiba and Sheikh Yamani come to the United Kingdom, they are not concerned to see the chairman of BNOC; they go straight to the Secretary of State or the Minister of State if necessary, if the Secretary of State is not around. The man who can influence decisions is the man to whom they want to talk. It is not the distinguished chairman of BNOC; he might not be available. Anyhow, he is not the major front.
It was rather significant that if the Government were lacking in influence, the Minister of State should send that letter to the oil companies on 31 July 1984, which he refused to give to the Select Committee because it held confidential information. It urged the companies to support the figure that had been set by BNOC.
Furthermore, we know that OPEC is considering the matter tomorrow. Today's edition of the Financial Times contains an article with the heading:
Government blocks BNOC move to stem losses".

That is just a heading; I shall not go into detail on that point, because the article is there for everyone to read. The newspaper is naturally assuming that the Government have the right to lay down what they consider to be the reality of the matter.
The third major objective of BNOC is security of supply. My right hon. Friend the Member for Guildford (Mr. Howell) and my hon. Friend the Member for Erewash dealt with that matter adequately. However, there is no problem in the present era of substantial surpluses. There are complete statutory controls covering 20 Acts of Parliament and a myriad of regulations over the North sea, and those operations go into considerable depth. The legislation includes the Energy Act 1976, which could be modified to provide for economic conditions short of crisis.
There is also a substantial indigenous oil industry and reserves in the United Kingdom. The Government hold a 31·731 per cent. investment in British Petroleum. That is not without significance. A strategic national reserve of proved areas could be established in the North sea, analogous to the naval reserves of the United States of America. They have not been so established. A strategic national storage facility could be evolved. That approach is well understood in the United States and Japan.
I should like to refer to the power to influence the market. It will be argued by my right hon. Friend the Minister of State that there is a distinction between fundamental change and short-term fluctuations. That point was also made by one of the directors of the BNOC on page 16 of the notes of evidence. However, that is of little value if one cannot identify the difference between the two. It is well known that BNOC's power to influence crises such as those in 1973–74 and 1979–80 was absolutely nil. The power to use the marginal barrel to influence a saturated market when OPEC's production allocations are under threat is also extremely limited. It is notorious that no attempt was made to smooth the market in the way recommended when the price was going up. When the price went up from $1·5 a barrel to $12 a barrel, not a squeak. When it was going up from $12 to $25, not a squeak. When it went up to $40 in Libya, not a squeak. The power has been used only when the price has been in decline. There is a vested interest on the part of Government to keep it up for revenue purposes.
I should like to make some recommendations. There is no harm in hon. Members making recommendations, even though the Government may disregard them. The basic approach is simple. To reduce the quarterly period to one month for fixing price to prevent term and spot prices moving too far apart is one recommendation. It is open to my right hon. Friend the Secretary of State to make it if he wants, but it is only cosmetic. One could fix the price by the spot market, analogous to what is going on in Norway. That approach is understood and could be commended. If we must keep BNOC, we should abstract the United Kingdom from the centre of the debate about managed oil prices and intergovernmental relations with OPEC, by shifting to the United States system of allowing individual buyers to post prices according to the market. I give the analogy of refiners in the United States of America. Ministers should give full encouragement to the forward market that emerged in the United Kingdom in 1982 in response to the need for a hedging mechanism in the United Kingdom.
There could be other recommendations as well. We could for the time being cease taking royalties in kind. We could reduce the amount of participation crude and, if the concept must be retained, we could reduce it to 20 per cent. of the total. Also, as BNOC has no long-term strategic storage facilities, if the corporation is to be retained, that prospect should be considered. The strategy involves the manipulation of stocks in relation to the market.
An alternative that I fully recommend, which I do not suppose the Minister will accept, is to abolish BNOC and let the industry operate subject to modifications of the Energy Act 1976. If BNOC is not abolished, a reference to the Monopolies and Mergers Commission for a comprehensive review might be useful.
I hope that my recommendations will be useful to the Minister if only because the structure of the market has been altered. In coming to his conclusions, he will note the ascendancy of the spot market in this era. It may change, but it is here for the moment and there has been a substantial decline in the term market. Spot prices for Arabian light are $27·45 while the term prices are $29. Spot prices for Brent blend are anything between $26·80 and $26·90, as opposed to the term price of $28·65. Therefore, spot is vital and one has to get a price near to it to avoid loss.
OPEC members ignore official prices. OPEC does not sell at term prices, and many members over-produce—the Nigerians, the Iranians and the Emirates—

Mr. Rowlands: And the United Kingdom.

Mr. Skeet: Those countries exceed agreed production quotas. The United Kingdom does not have agreed production figures.
Those countries exceed production quotas, formerly 17·5 million barrels a day and now 16 million barrels a day. Half of them sell at discounts and under barter arrangements and by other means. It is hypocritical on their part to say that the United Kingdom's action is wrong. The United Kingdom could afford to be much more courageous. The size of stocks is often the invisible factor. The stock position is becoming a key factor. It could have played a distinctive and much more effective role in the 1979–80 crisis.
All that I shall say about taxation is that current taxation distorts the market. The current differentials do not make sense. The problem has arisen because differentials between light and heavy crude oils have not been changed, and it does not look as if there is any possibility of OPEC getting together to change them.
There have been one or two other changes—a change in the use of oil and the yield of products, and a decline in the energy-intensive industries. The impact of conservation has been greatly underestimated.
BNOC and the Government have failed to assess correctly the measure of demand in a saturated market and to recognise the inability of OPEC members to maintain their production quotas and change differentials. For the time being, the market is on the way down. I suggest that the grant should be made only subject to the strict conditions under section 6(2) of the 1982 Act; otherwise it would be unreasonable for the House to pass it.

Mr. John Hannam: I am grateful for this opportunity of saying a few words in this debate which, as has already been said, comes on the eve of an important OPEC meeting tomorrow. I congratulate my hon. Friend the Member for Havant (Mr. Lloyd), the Chairman of the Select Committee, on the excellent way in which he introduced the debate. We have heard a fascinating series of speeches, and the speech of my right hon. Friend the Member for Guildford (Mr. Howell) was superb in its analysis of the situation facing us.
It is equally important that we should be debating oil at a time when our minds have been totally concentrated on the crisis in the coal industry. In a way, like many energy matters, the two subjects are related, although not in the context of this debate. The heavy use of oil in our power stations has replaced coal burning, and has thereby eased the surplus of heavy oil stocks which now exists.
The extra amount of oil now consumed by our electricity generating stations must, however, have a limited effect on the overall world situation. But if instead of recent reports of attacks by Iraqi jets on oil tankers in the Gulf there were reports of the closure of the Straits of Hormuz by action there, the present situation would be totally reversed, and we would be discussing the crisis of oil shortages developing, not in weeks or months, but literally in hours.
We have experienced that in the past, and it will be remembered that within hours queues were forming at garages, rationing was considered and all sorts of emergency measures were taken. A recurrence is not a remote possibility. It is a very real one. The Iran-Iraq war has not ended and more and more is becoming a war of attrition aimed at oil production and the movement of oil rather than a swift land-based assault.
We are now in the middle of a coal industry dispute, and are dependent on a large oil burn in our power stations, yet in the middle east there is potential for disaster in relation to oil supplies. BNOC as it exists today — a trading company in North sea oil—is a security weapon for the Government. In my view it should be retained and clearly explained as such.
Although private oil companies have given assurances of supply to the United Kingdom market in the event of a crisis, access to 51 per cent. of participation oil, which BNOC has by law, would be a valuable underpinning of our crude oil supplies in the event of such an emergency. I therefore believe that we are right to continue the present BNOC role in relation to security of supply.
Perhaps the most important aspect of this report is the role of Government in the pricing of our oil. I actually believe that there is a limited role to play and that it should be clearly stated. I accept the Select Committee's criticism that perhaps this has not been clearly stated, and the debate gives my right hon. Friend the Minister of State an opportunity more clearly to define that role.
If one accepts my description of the crisis that could develop quickly, no one can doubt that at very short notice oil prices could begin to escalate sharply, thereby affecting world currencies and creating economic instability. The same situation could develop in reverse and there could be a downward spiral of oil prices. The oil market is unstable at present, with excess world production capacity, and the


marginal cost of production is much lower than the current world price, as my hon. Friend the Member for Havant clearly explained.
In the short term, oil demand and production are insensitive to price, but with Nigeria threatening to match any price reduction by BNOC, and with Saudi Arabia and other Gulf states speaking in terms of a price war would force other oil producers out of the market, there might be no clear bottom to such a free fall in oil prices.
I do not believe that we would benefit from a collapse in oil prices. I doubt whether any hon. Member believes that. But great damage could be caused to the world banking system and to the basis for industrial investment in energy industries, not just in production but in energy-using and conservation industries.
The likelihood is, as in the 1970s, that we would experience a sharp increase as equilibrium was restored. We would again be in the seesaw position that we were in throughout the late part of the 1970s and the early 1980s, and our own expensive North sea oil-producing sector would be hard hit.
Only this morning I asked a number of oil company executives whether they felt that BNOC should continue to play a role, however limited, in pricing at the margin. They all felt that such a role had to be played. If we accept that BNOC can exert any stabilising influence, even in the shortest of terms, it should continue to do so. The spot market is declining, companies are releasing stocks on to the market, and traders are selling short in the expectation of a price fall. OPEC meets tomorrow and it must decide its response.
In these circumstances, a price cut by BNOC before this meeting would further undermine market confidence and prompt a further "stock draw" and short selling. That would set off price cuts by other producers, and again we would get caught in the downward spiral of the collapse of oil prices. Nor would such an action enable BNOC to reduce its losses, as in that kind of uncertain market spot prices are likely to fall by as much as, or more than, term contract prices would be cut. It would therefore be wise to wait until underlying market trends have been clarified by the OPEC meeting and we have a truer indication of the winter demand for oil. Experience has shown how a change in climatic conditions in the winter can materially affect oil demand within a short period.
The Select Committee was right to draw attention to the role of BNOC and, therefore, the Government's role in oil pricing. I accept that there is an inter-relationship between the two. The £45 million losses during the recent period of falling spot oil prices requires detailed explanation, although in oil trading terms that is not a large amount and might easily be recouped in a stable or rising market. When one looks at the figures of the major oil companies, one can see that a comparatively small amount of money is lost or gained. In any case, I imagine that the Exchequer recoups most of this loss in increased tax revenue. I hope that my right hon. Friend will confirm that.
I do not believe that BNOC or the Government have any illusions about their power to determine or influence oil prices in other than the most limited or marginal way. It would be wrong for BNOC to try to lead in fixing oil prices, but any attempt to retain stability is to be welcomed. The BNOC price card can be played only occasionally. It cannot be used every few months. There must be quite a long interval between occasion of its use. I hope that my right hon. Friend will assure the House that

he accepts this description of BNOC's role and that the present losses on trading will be eliminated once the threatened free for all drop in prices has been averted. Our thanks are due to my hon. Friend and his Committee for the excellent work they carried out in a very short period of time. I hope that we shall receive a number of detailed answers to the questions that the committee raised.
In conclusion, may I say to the House that I have another parliamentary engagement to fulfil, which was fixed a long time ago. Therefore, I hope that my right hon. Friend and hon. Members will excuse me if I am not here for the winding-up speeches.

Mr. Gerald Malone: At the risk of placing yet another laurel on the stoical head of my hon. Friend the Member for Havant (Mr. Lloyd) I shall nevertheless do so; it is a risk worth taking. My hon. Friend performed an excellent job in chairing the Select Committee throughout this important inquiry. I run a risk in experiencing chairmanship of that kind. As a relatively new Member of the House I am beginning to think that these inquiries can take place within 15 days, with an immediate debate on the report being held on the Floor of the House. Perhaps that illusion will be shattered in due course. In congratulating my hon. Friend, may I extend my remarks not only to my hon. Friend and to my colleagues on the Committee but to the officers who serviced the Committee and produced a draft report and then a final report within very strict guidelines.
A number of interesting points have been highlighted relating to BNOC. Much has been said about its important statutory responsibility to secure supply. During the inquiry I felt that the responsibility for ensuring security of supply was outweighed by what my right hon. Friend the Minister believed to be another responsibility of equal, if not overriding importance, namely the national interest. Throughout our short inquiry, it seemed to me that the definition of "national interest" was at the centre of the investigation. My view is that, when the legislation was framed, drafted and passed by the House, "national interest" had a different meaning from its present definition. My view is that "national interest" had some connection with security of supply. It had to be placed in the context of the failure of the oil companies that were participating in North sea development to give satisfactory undertakings to the Government of the day that in a crisis they would continue to supply resources to the Government. What has taken place since then is an indication of a change in the definition of "national interest". This definition was returned to again and again during the evidence given by both BNOC and my right hon. Friend. I ask my right hon. Friend to elaborate in his winding-up speech upon what he now believes to be the national interest.
It is possible that a case could be made for maintaining BNOC involvement in the national interest, whatever that may be. The problem is that it has not yet been properly defined. There has been a departure from the original concept. Is it in the national interest to maintain a continuous process of investment in the North sea? I understand that oil companies and others who are involved in North sea developments and its potential believe this to be a great priority. That may be a national interest which is worth developing.
Is it in the national interest to maintain the price of oil at a certain level so that the Exchequer benefits from it? The evidence we heard leads me to say that that is not the case — for two reasons. There is the view that the Exchequer benefits from a high price and a high tax take. Alternatively, if we support the price of oil, as we are doing in this supplementary Estimate, the view is that we have to vote sufficient funds to supplement the losses of BNOC. It goes further than that and points to another motive of the Government.
There is not a strict balance between the benefit to the Exchequer and the benefit to the country and BNOC as a whole in maintaining prices if they operate a tax break system. I do not suggest that there was a covert arrangement. However, an arrangement was certainly arrived at by the Treasury which gave those who participated in purchasing oil and selling it on the market at BNOC prices a marker price. This was fixed for revenue and tax purposes at a totally different level than that which was fixed by BNOC. That indicates that another extremely relevant factor was involved in what the Government were doing. This goes to the crux of the matter.
We were constantly told in the evidence by parties who were mutually engaged in discussions, conversations and various exchanges of influence that one had no effective influence over the other. I found this to be quite incredible. Perhaps I may suggest to the House a similar example. If a man and his mistress are found in flagrante delicto—not in a seedy hotel but in a comfortable hotel—and they suggest that they are engaged in no more than an exchange of views, one could take an objective view of it. However, my objective view of the suggestion made by my right hon. Friend and BNOC in their evidence was that I did not believe it. I believe that there was collusion and a certainty of purpose in their negotiations and discussions and that they went along with each other in very close agreement. The question before the House is whether that was in the national interest and whether it is right that we should vote the supplementary Estimate.
I credit my right hon. Friend with a little more horse sense than to suggest to the House that this came out of the blue. I believe that it was unique. There has been an attempt to influence oil prices. My right hon. Friend probably understands that in a wider context and in the more difficult market than has been faced during the last 10 or 12 months this might be impossible. However, there was an opportunity, and the Government took it. In this instance, the price is relatively low. However, I doubt very much whether this kind of opportunity can be taken again.
It is worth considering where we go from here. It is essential that we should move towards a more market-oriented pricing system for BNOC. The lead has been given by Norway. I believe that it will inevitably be followed, unless we are to come back to the House continually with supplementary Estimates of this kind. If this were to be a permanent feature of Government policy, the supplementary Estimate would not be for £45 million. It would be for a figure well in excess of £45 million. I accept that this is an extremely delicate time. Meetings of OPEC are taking place. Therefore, it is impossible for my right hon. Friend to form a firm view. However, it would be helpful if he could tell us that movement is taking place towards a more market-oriented pricing system. Unless such an indication is given, we must assume that the policy

of this country is that oil prices should be kept high—for the good of what? I do not take the view that our manufacturing industries should be thrown away or put at a disadvantage compared with our industrial competitors. My view is that if within the broad context of Government policy it is possible to achieve a low energy pricing policy, we should be decisively striving towards it rather than trying to prevent it. I shall be most interested to hear my right hon. Friend's views on the direction in which he sees Government policy going.
It would be unfortunate if, in the future, we were always debating whether BNOC should be continually subvented. Can we tonight have a clear view of where Government policy is leading? If my right hon. Friend can convince the House that to subsidise oil prices with taxpayers' money, albeit in a somewhat circuitous way, is worthwhile for Britain, let us hear that and argue it out on the Floor of the House. My right hon. Friend may well convince us on that point.
Unless my right hon. Friend is prepared to admit that the purposes for which the BNOC was set up in the first place have been long outlived by the practical realities of the market—the fact of a continuously rising oil price until relatively recently and the fact that Britain is now a major producer and is well able in an oil glut to secure its supply—the debate would be sterile. That would be a loss, in view of all the work that my hon. Friend the Member for Havant (Mr. Lloyd) did in Committee.

8 pm

Mr. Ted Rowlands: Having been brought up against a Welsh nonconformist background, I shall not follow the hon. Member for Aberdeen, South (Mr. Malone) in the habits he so vividly described in Latin terms. But I shall follow him in one other sense; that is to convey my congratulations and thanks to the Chairman and members of the Select Committee for producing this short and sharp report.
It is sharp in more ways than one. I am too gentle a soul to draw too much attention to some of the things that the Committee says about the Government's policy and their attitude and approach. The Minister will have read it and the strictures are there. However, it was invaluable in helping us to concentrate our minds.
I felt a nostalgia for our debates on the Oil and Gas (Enterprise) Bill. There are few survivors of those Committees. The hon. Member for Bedfordshire, North (Mr. Skeet) and I spent many an hour debating the problems that would arise in BNOC once it was shorn from the mainstream exploration and development side which was hived off in the form of Britoil.
Between us we made a number of forecasts about the potential vulnerability of a national oil corporation left to trade in the way that it was. No hon. Members, despite our perception, forecasting and crystal ball gazing, quite foresaw the way in which the financial crisis would hit BNOC. Why we did not has been brought out by several hon. Members who have spoken. We spent our time thinking that BNOC (Trading) had only one objective, and that was to secure supplies.
I cannot recall debating the other objectives at any length in Committee. The then Secretary of State for Energy, who is now Chancellor, and his Ministers, did not produce any argument in favour of a BNOC trading organisation other than to ensure the security of supply.
Clearly, in doing that, the corporation would become involved in pricing, but it would, in a sense, always be reacting to pricing and not in any way trying to shape up.
It is clear that in recent months, for reasons which await a more elaborate account from the Minister, BNOC and the Government have been trying to do something rather different from what was traditionally seen to be the role of BNOC (Trading). It would be easy to heap blame on a state organisation that has lost £45 million. But, as the report and the evidence clearly show, the decision was taken by the Government and BNOC after consultation. We should not try to blame BNOC. It was arrived at by a joint process.
Let me underline that point. In paragraph 93 of the evidence the Minister gave the striking testimony:
I believe the BNOC has scope to act in the short term to influence what may happen in the oil market.
That was a straightforward admission that the Government supported and were involved in the process of trying to do something, albeit in the short term, about oil prices.
Mr. Goskirk, in his evidence at paragraph 9, underlined that point even more strongly. He said:
we felt that it was worthwhile as far as both our commercial interest and—following discussion with the Secretary of State for Energy—the national interest were concerned to seek a pause. That pause took place and the pause was achieved".
Again, that is a clear statement of a deliberate endeavour. We do not say that the Government have acted surreptitiously. At least in the evidence there is a confession that there was a joint operation of a kind and character which, when we debated the notion and nature of the BNOC, I cannot recall ever envisaging.
Therefore, we have every right to say that there is not just a change in degree but a qualitative change in the way in which the BNOC and the Government tried to do something about oil prices in the summer of this year. We must ask why they did it, what has been the consequence and where we go from here. Those are the three questions posed in one way or another by the Select Committee's report.
I should like to have a shot at trying to answer some of those questions. Let me try to offer a slightly different interpretation of events from that produced by the right hon. Member for Guildford (Mr. Howell) and one or two other hon. Members who have spoken critically of the attitude of Government and BNOC to oil prices.
I do not think for one moment that either BNOC or the Government chose to become involved. It was not some sort of great voluntary act. The missing ingredient in the otherwise excellent Select Committee's report is some sort of analysis of how events unfolded over the 18 months leading up to the events of this summer. If we look back at those 18 months and at the role oil plays in our economy, we can anticipate some of the answers that the Minister might wish to give as to why we became involved in the way that we did this summer.
I have discussed the matter with various people and I believe that part of the answer lies in the events of February and March 1983. Until then, BNOC (Trading) and the Government had managed to stay out of the price argument in international terms. BNOC did what we all thought it was doing — reacted to prices. When the market shifted its price moved.
There was a vigorous reaction by OPEC and, particularly, the Nigerians, in February and March 1983 when they trumped the BNOC alteration in price and therefore deliberately involved BNOC and the

Government in the whole argument about pricing policy. Until then we had stayed out of the turmoil of OPEC arguments and the problems of the various conflicting interests within OPEC. From that time on BNOC, the Government and North sea oil prices were caught up in the commercial and political swirl of OPEC and the problems of some of its members. Therefore, we did not have much choice. We did not volunteer—I hope that the Minister did not volunteer—to get involved in those arguments. There was a reaction from OPEC to the situation.
If one agrees with that assessment and interpretation, it helps us to try to understand what followed. Once such a situation occurs, North sea oil prices become a politically sensitive issue. They become part and parcel of an argument with OPEC. I cannot recall Sheikh Yamani or the chairman of OPEC making statements of the kind that we have seen today on the tapes or in the last few days and weeks about North sea oil prices. It is not our position but OPEC's that is the reason for our sudden involvement. OPEC's whole ramshackle effort to sustain a price and to balance and juggle its position is in trouble.
The ultimate absurdity was when the Norwegians managed to create the last oil crisis. Who, in the name of heaven, would have thought that the Norwegians could create an oil crisis? The only reason why the Norwegians have managed to create an oil crisis and North sea oil prices have become politically sensitive is that OPEC cannot square the situation. OPEC cannot balance the books. It cannot balance the relationship between production price and demand. It is trying to do so, and I understand the reasons for that, but the problem is with OPEC. We have been caught up in the swirl. That is one of the reasons why British and Norwegian North sea oil prices, BNOC and Statoil are now causing not so much a ripple as a shudder throughout the system. It is because the system itself is now unstable.
In one sense, Sheikh Yamani has a point. Throughout his evidence to the Select Committee the Minister defended the short-term intervention on the ground that it was an attempt to stabilise the situation. He does not seem to mind which way prices go, so long as they go quietly. Whether they go up or down he seems not to have a view, although we shall try to tease one out of him today. Because he wanted them to go quietly, he was interested in stability. I suspect, however, that the only people who can provide some kind of stability are the members of OPEC.

Mr. Skeet: But they cannot.

Mr. Rowlands: Perhaps not, but only OPEC has the size and weight even to attempt it. Sheikh Yamani thus has some right to feel that there is still something of perfidious Albion about us. We talk about price stability and indulge in mini-interventions in the market, while draining our North sea oil at a fantastic pace. Despite the abortive attempt to cut the price in July so as to sell the oil, I suspect that most people are on their prayer mats praying that OPEC will succeed in holding something like the current price level. For a variety of reasons, a sudden downward lurch in oil prices may not be in the interests of the British economy. I leave that open to question as I intend to return to the points raised by Conservative Members about the national interest in this respect. At any rate, if we are talking about price stability only OPEC is capable of achieving that. Experience in July certainly showed that


the British Government and BNOC cannot do much about it. Moreover, the attempt cost £45 million. We must therefore be careful where we stand on this.

Mr. Skeet: The hon. Gentleman must face reality. If demand is slack and OPEC cannot control its member states, which constantly seek to increase production, there will be a greater surplus and prices will fall in the long term.

Mr. Rowlands: If the hon. Gentleman had listened more carefully, he would realise that I had described that situation as vividly as he has. As I have said, OPEC has and will continue to have great difficulty in maintaining that ramshackle operation.

Mr. Skeet: Why should we support it?

Mr. Rowlands: I did not say that we should. I am about to give my view on the matter. I was saying that Sheikh Yamani might have a point because we keep talking about price stability when he and OPEC are the only people capable of trying to achieve a measure of stability. It may not be in our interests for that to happen, but in the summer the Government and BNOC tried in a small way to stabilise prices and to create a pause through a minor form of intervention.

Mr. Skeet: indicated dissent.

Mr. Rowlands: The hon. Gentleman shakes his head. I know that the attempt failed. It tried to buck the system, but the power of the market was far greater than the effort put into the attempt to influence it. Nevertheless, if Sheikh Yamani were in the House today I believe that he would try to make the case that I have described, although personally I do not agree with it and I do not believe that it is necessarily in our best interest for OPEC to succeed in its attempt.
This is what we want to know from the Minister. It was he, not the Select Committee or the Opposition, who talked about the greater national interest. We are entitled to ask him to define what he means by that. The Select Committee believes that the Government have an oil price policy. I do not know whether they have such a policy, but assuming that they do, it is a somewhat schizophrenic one to say the least. I hope that the Minister will define what he regards as the broader national interest in relation to the action that he has chosen to take.
Like other hon. Members, I wish to emphasise the dilemmas and conundrums that face us when we discuss the national interest in relation to oil prices. A fairly dramatic fall in oil prices, albeit organised to take place reasonably steadily, might help to recreate our non-oil economy. The area that I represent would certainly welcome support and assistance to recreate our manufacturing industry. On the other hand, a high and stable price is perhaps the only way to ensure development of our most marginal oilfields. What is the Minister's view on that? Would a fall in price of the kind described by the right hon. Member for Guildford (Mr. Howell), a former Secretary of State, have a detrimental effect on the marginal oil fields so important to future North sea oil supplies? Would a high, stable oil price prevent further decimation of our currency against the dollar? In one year we have already devalued our currency by 25 per cent. against the dollar.
The right hon. Member for Guildford seemed to take a rather sanguine attitude to the possible impact on our currency of a fall in oil price of $4 or so per barrel. I should have expected such a major issue to arouse considerable worry. Certainly the Treasury could not ignore it unless the Government's "sound money" policy has now been abandoned. As virtually every hon. Member has pointed out, the Chancellor is like an addict. He is hooked on the oil revenue and cannot afford to come off it. To add to our conundrums and dilemmas, the Chancellor's position is perhaps the most curious of all. Every time the pound goes down his oil revenues increase because they are calculated in dollars, giving him a rather perverse, topsy-turvy interest in further devaluation of the pound against the dollar.
Those are the dilemmas and conundrums that we face and to which the Select Committee rightly challenged the Government to respond. I feel that the poor Minister of State, Department of Energy should not really be facing these questions, as answering them should be the job of the Chancellor. Nevertheless, we can ask the Minister of State what he intends to do in response to the situation in which BNOC and the Government now find themselves.
However, we must be careful. Here I part company with some Conservative Members. In the longer term I believe that there remains an important role— a vital role—for BNOC in maintaining the security of our oil supplies. That was the original reason for maintaining a state trading oil company, and we should not be blown off course because in the short term we have a glut of oil and BNOC has to change the shrewd and skilful pricing operation which it maintained until last summer. There is a strong case for retaining BNOC (Trading), which has been and can still be a sensible and useful instrument.
It is a pity that the Chancellor of the Exchequer—the former Secretary of State for Energy — is not here, although he has apologised to us for his absence and explained his reasons. He, more than anyone else, knows the value of BNOC and how it can marginally alter the situation and bring oil back into the market. In the summer of 1979, he was harried at the Dispatch Box by Government and Opposition Members about the shortage of oil at filling stations throughout the country. He knows about the skilful role played by BNOC in bringing back into our market not a huge but a significant and useful amount of oil and in trying to stabilise oil supplies within the United Kingdom. He will also know — here I disagree with the hon. Member for Erewash (Mr. Rost), who said that if BNOC carries on, it could cut the volume of oil purchased—that volume is essential for flexibility and for the potential of affecting the market in a time of crisis or shortage. It was so in 1979 and would be so in a future crisis.
The hon. Member for Bedfordshire, North (Mr. Skeet) tried to argue that we have other means of ensuring that we do not run short of oil. He had the audacity to quote British Petroleum as an example. In 1973–74, when the Government owned a much greater percentage of BP and the right hon. Member for Old Bexley and Sidcup (Mr. Heath) called in the chairman of BP on the question whether BP should make some great national contribution to the management of the crisis, he was given short shrift—or so I understand from some of the books and articles that I have read. We cannot rely on a 30 per cent. share in BP to offer security of supply. I do not think that the cumbersome and draconian powers in the 1976 Energy


Act would suffice either. We argued that out in discussion on the Oil and Gas (Enterprise) Act 1982. There is no sensible solution in that direction. We have a sensible, helpful, professionally organised and professionally run trading corporation which has been given that function. In my view, despite the problems identified in the report, and the Committee's strictures and the valuable questions that it has posed, the corporation should be allowed to survive.

The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): I should like first to congratulate my hon. Friend the Member for Havant (Mr. Lloyd)—as other right hon. and hon. Members have done—on chairing the Select Committee and presenting the report today. I would certainly wish to echo the congratulations that have been showered on my hon. Friend and his Committee from every side. They are to be congratulated especially on the speed with which they carried through their investigation. I also congratulate my hon. Friend on the manner in which he presented his report to us. In many respects, his speech was a model of the way in which such reports should be presented. My hon. Friend will not, however, be surprised to hear that, although I admire his style, I do not wholly agree with the content of his speech.
This is an important subject, and I think that the Select Committee did a good job in a short time, although I may not agree with everything said in the report. The subject is important not only to the members of the Select Committee, to my Department and to BNOC, but on a much wider scale. It is therefore disappointing that the House is not crowded—to say the least—for this debate. I understand the reasons why some hon. Members who have participated in the debate have not been able to see the matter to its conclusion, but I am sorry that they are not here.
Firstly, I wish to deal with one or two points not referred to so far at any length, although my hon. Friend the Member for Havant referred to some of them. I refer to some of the procedural points to which the Committee drew attention in the third paragraph of its report. As the members of the Select Committee will understand, some of those matters are the responsibility of my right hon. Friend the Leader of the House. I have drawn those matters to his attention.
However, one of the procedural points lies closer to my own responsibilities. I refer to the recommendation that, in future, minutes notifying Parliament of a contingent liability to the Consolidated Fund should be copied to the Public Accounts Committee and the relevant departmental Select Committee. I discussed that point with my right hon. Friend the Leader of the House, and the Goverment accept the Committee's view. My right hon. Friend is asking all Government Departments to observe that practice in future. I apologise to the Committee for not having done so in this case, and I am glad that this occasion has given us an opportunity to change in a minor but important way the procedures that we follow in relation to Select Committees and supplementary estimates.
On the main subject of the debate, I have the same views as I expressed when I appeared before the Select Committee a week ago. There are two central themes. First, is it necessary to retain BNOC? The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) dwelt

on that point in the latter part of his speech. He spoke about participation and security of supply. The second theme is the exact nature of the Government's relationship to BNOC and the Government's policy in relation to actions that may be followed by BNOC in carrying out its responsibilities.
The hon. Member for Merthyr Tydfil and Rhymney and my hon. Friend the Member for Exeter (Mr. Hannam) were right to draw attention to one of the fundamental subjects of discussion in such a debate—the role of BNOC in relation to its participation agreements and to the security of supply. I remind my hon. Friend the Member for Erewash (Mr. Rost) that under the participation agreements, which have been fully discussed in earlier debates, BNOC has to give notice up to two years in advance. If one takes the view that BNOC should work in a more flexible way, one should be prepared to argue that there should be no participation agreements. However, if one has participation agreements, and contracts have to be entered into in advance and notice has to be given, it is inevitable that the situation cannot be as flexible as my hon. Friend the Member for Erewash and some other hon. Members would wish.
As my hon. Friend the Member for Exeter said, we could face disruption in the Gulf at any time. Exocets are still used against tankers, and Iran is still threatening retaliation on the oil trade of other Arab states. Most of the present world surplus capacity is also in the Gulf. If production there were lost, so also would be the spare capacity. During the past 12 months one of the main anxieties in the European Community which is principally an oil-consuming interest, and in the International Energy Agency has been the threat of an interruption in the supply of oil from the Gulf. Although there is a surplus, the IEA reviewed its contingency plans which culminated in co-ordination, especially over the use of stocks. The agreement was reached as recently as 11 July. The adequate stocks of oil have been discussed three times this year at meetings of the Energy Council of the European Community which I have attended. Simply because we transparently have a surplus, we should not dismiss the argument about security of supply. We should also bear it in mind that security of supplying is of interest to other consuming countries.
However, participation is not a simply a matter of security. We must ensure that the United Kingdom continental shelf and the price that Britain secures for oil in international markets is not entirely under the control of international integrated companies. We must also ensure that there are some arms length sales at transparent prices. That is an important function which BNOC performs in setting the reference price. I know that there are other systems. Some have been mentioned in Committee and my hon. Friend the Member for Bedfordshire, North, (Mr. Skeet) in his knowledgeable speech — I expect no less of him — referred to the American posted price system. Other systems are not necessarily comparable with those which we work. The American system is based on a strong independent refinery sector. That makes it much easier to establish the arm's-length price. If we think that we need another system, it is not enough simply to draw attention to systems in other countries.
In regard to security of supply and a reference price for taxation purposes, BNOC performs an important and useful function. The second main area of debate today and


in the Committee concerns policy on oil prices. The hon. Member for Gordon (Mr. Bruce) said that we appear to have no policy. I only wish that he had read the Committee's evidence. The hon. Member for Merthyr Tydfil and Rhymney obviously has. If the hon. Member for Gordon had read my evidence to the Committee and that of the BNOC, I do not believe that he would have said what he did. I accept what my right hon. Friend the Member for Guildford (Mr. Howell), who has had experience of these responsibilities, and others have said. I told the Select Committee that the United Kingdom cannot control world oil prices. I accept that. We are only a minor player as compared to others. A country is given power in the world oil market by its production capacity and reserves. The United Kingdom is in a relatively minor league in that regard as compared to other countries such as Russia and the United States. Saudi Arabia is in a completely different league as it has four times our production capacity and 13 times our reserves. Moreover, it is able to vary production from less than 4 million barrels a day to 10 million barrels a day. That puts the matter into perspective. As I think I have made clear, the United Kingdom cannot influence any long-term trend in oil prices.

Mr. Skeet: On 16 July—at the time of the collapse of prices—my right hon. Friend told me that there were market forces which guide BNOC. I assume that he did not intervene to save this great liability because some other factors were involved. What were they? What were the factors that he was keen to operate on which would stay the hand of BNOC? My right hon. Friend did not intervene on oil prices when he could have done to save the situation.

Mr. Buchanan-Smith: Perhaps my hon. Friend will give me a little more time to develop my speech. I should like to deal with the relationship between the Government and BNOC. I should like also to answer the question which more than one hon. Member has asked—what price level the United Kingdom and the Government believe correct. As I endeavoured to make clear in the Select Committee last week, the Government do not believe that any given price is desirable in the national interest. I accept in general terms that a lower price would stimulate the world economy and lead to various advantages. However, it would also lead to certain disadvantages. That issue is, to some extent, academic. The Select Committee considered it. As I said in the Committee, the question is academic because we do not believe that anything we do will influence the long-term movement of world prices. However, we recognise that precipitate changes in price pose a danger in the world oil market. There is no short-term economic limit to the price to which oil could rise, nor is there any economic floor. There is always a risk that once the price has started to change there can be a huge and fast change.

Mr. Skeet: Will my right hon. Friend give way?

Mr. Buchanan-Smith: My hon. Friend has made his speech. Perhaps he will allow me to develop mine.
In an effective speech, my right hon. Friend the Member for Guildford said that there could be a role for BNOC or the Government in the short term taking an

interest in what happens to oil prices. If BNOC allowed a fast, sharp and precipitate change in the short term, great damage could result. That is the type of national interest to which I ask my hon. Friend the Member for Bedfordshire, North to address himself.

Mr. Skeet: Will my right hon. Friend give way?

Mr. Buchanan-Smith: I shall give way soon. My hon. Friend has asked me to say what the national interest is. He wants to interrupt me before I have completed my answer. Short-term precipitate changes would damage the economy. They would destroy some of the basis for industrial investment, especially in energy industries and, I believe, in energy-using industries and energy conservation. On a much wider scale, those changes could have a severe influence on the world banking system. That view is taken by not only the Government but the International Energy Agency, which is an arm of the OECD on which the consuming economies greatly outnumber the producing economies. My view is not one taken by the producing countries, as some hon. Members sought to make out, but is shared by consuming countries, not least in the OECD.

Mr. Skeet: My right hon. Friend said that the intervention would smooth over difficulties whether the price was going down or up. When the price went up, it increased by leaps and bounds. There were pauses and opportunities for his Government to intervene. The Government let the prices go increasingly higher because they knew they could have an interest. The only time there was intervention was when the prices were coming down.

Mr. Buchanan-Smith: I do not believe that my hon. Friend is wholly correct. This debate has occurred in the context of a decreasing world price, but in the 1978–80 period BNOC price rises lagged behind those of OPEC countries. To some extent, that had a smoothing effect and acted as a restraint on certain proposals, although the price did go to a higher level. I believe that BNOC could not have influenced the eventual level reached. No more, no less—I used that phrase last week—does BNOC seek to influence price during a downward movement of prices. I believe that BNOC can have relatively little influence on the eventual price, but it can smooth the movement from one market to another, and that is why its role is important.

Mr. Rowlands: As he did in his evidence to the Select Committee, the Minister has emphasised that the Government want stability of movement of price. What does the right hon. Gentleman believe is desirable to come from the OPEC talks tomorrow?

Mr. Buchanan-Smith: The hon. Gentleman would think me naive if I were prepared to speculate on the OPEC talks. I shall correct the hon. Gentleman on one point. He said that I was interested in stability of prices. The Government and BNOC are interested in the stability of prices—in the short term. I agree with my right hon. Friend the Member for Guildford that we do not have an influence on long-term movement of prices. We have an opportunity to assist stability in the short term in a movement from one market to another.
The Government's policy on oil prices has been stated more than once. It is to avoid destabilising moves in the short term. To the limited extent BNOC can influence events, its aim has been to promote stability. BNOC has


therefore resisted making precipitate responses to short-term, speculative, spot price movements. I emphasise yet again that BNOC cannot and should not stand in the way of underlying market trends. I hope that my hon. Friend the Member for Havant (Mr. Lloyd) will accept that point. With respect, I do not believe that the Select Committee gave sufficient attention to that aspect.

Mr. Bruce: Given that the right hon. Gentleman says that the policy to intervene aims to provide short-term, but not long-term, influence on the trend, is it likely that the right hon. Gentleman will have to return to the House on other occasions with a request for a similar amount of money? That is the implication in the right hon. Gentleman's speech.

Mr. Buchanan-Smith: I cannot answer for what may happen in the future, but I remind hon. Members who have raised this point that this possibility was mentioned by my right hon. Friend the Chancellor of the Exchequer when he was Secretary of State for Energy. He made those points to the Committee in 1982 when the legislation provided specifically for moneys of this nature. My right hon. Friend admitted that it was conceivable that the corporation could, in some years, incur losses, and that is precisely what has happened. There is nothing unusual or unpredictable in what has happened.
We are not trying to control or interfere with the market in the longer term. We agreed with BNOC that a price cut in July or August could be damaging. It would have been incredible for the Government to sit back and do nothing. After discussing the matter with the oil companies, I asked them to think carefully before pressing BNOC to make any premature price cut. When the companies saw that a precipitate price cut could be avoided, they not only co-operated but contributed towards it. That action was taken sensibly and rationally. I emphasise that this cut was not a novelty. In 1980, we pressed companies to avoid abnormal market transactions that might push prices up. There was, therefore, nothing new in the relationship between the Government and BNOC.
My hon. Friend the Member for Bedfordshire, North asked whether the Government rather than BNOC was responsible. While consultations occur between the Government and BNOC, the ultimate decision is taken by BNOC. BNOC has an independent board, and the corporation is responsible for proposing prices for the different grades of oil with which it deals. I hope that the House and the Select Committee will not forget that, in evidence to the Select Committee, BNOC's chairman made it clear that there was no difference in the relationship between the Government and BNOC between the spring of 1983 and the summer of 1984. There was, therefore, no introduction of policy and no change of policy or practice in that period.

Mr. Barron: Will the right hon. Gentleman give way?

Mr. Buchanan-Smith: I have only a few minutes left, and I want to deal with some of the other points raised in the debate.
The action taken in 1983 and in the summer of 1984 was effective. As soon as it was clear that BNOC would not cut its price in July and August, the price quickly became a spot price and returned to a proper relationship. BNOC cut the price only when the longer-term trend to a lower price started to emerge in October. As my right hon. Friend the Member for Guildford said, neither BNOC nor the Government can be a price leader in such matters. We have to follow the market, but we believe that in the short term we can have some influence.
My hon. Friends the Members for Exeter (Mr. Hannam) and for Aberdeen, South (Mr. Malone) referred to the £45 million cost. In my evidence last week to the Select Committee, I made it clear how that amount was calculated. It is worth remembering, as my hon. Friend the Member for Exeter said, and I fill in the point, that for every pound lost by BNOC over three quarters has been recouped directly by the Inland Revenue through incrased petroleum revenue tax and corporation tax paid by BNOC's suppliers. The cost to the Exchequer is about one quarter of the total. It is a small sum to pay in relation to the more general benefits and in relation to the higher cost to the economy which would be caused by the short-term destabilisation of prices.
What overshadows events to some extent at the moment, as the hon. Member for Merthyr Tydfil and Rhymney said, is the OPEC meeting this week. One of the most important things to remind ourselves is that not all oil is suffering from a weak market. The spot price for the world swing crude, the Saudi Arabia mix, is not far from its firm price.
One of the most important problems to which I hope OPEC will address itself this week is that of differentials. Until that is resolved, it is difficult to form a proper view of the way in which prices may move in the future. There are other uncertainties. There are uncertainties about stocks. Current commercial stocks are down to about 71 days' supply. That is below the 1978 level when the Western world was generally ill-prepared to resist the reduction in Iran's oil supply.
Although we sometimes make fun of it, there is the weather. The third week of December last year saw one of the strongest firmings of prices. As I said to the Committee last week, decisions should not be taken in advance of knowing the conditions—

Original question deferred, pursuant to Paragraph (2)(c) of Standing Order No. 19 (Consideration of Estimates).

Industrial Training

The Minister of State, Department of Employment (Mr. Peter Morrison): I beg to move,
That the draft Industrial Training Levy (Construction Board) Order 1984, which was laid before this House on 3rd December, be approved.
The House will recall that at about the same time last year a similar order concerning the construction industry training board was laid before the House. It was debated and approved unanimously by both Houses. The present order similarly requires parliamentary approval in accordance with the Industrial Training Act 1982 because one part of it involves a levy of 2 per cent. on payments made for labour-only subcontracting.
I hope that the hon. Member for St. Helens, North (Mr. Evans) will agree that it is important to ensure that all except the smallest firms contribute to the costs of training. We must do everything we can to ensure that we are not bedevilled by skill shortages, as we have been in the past. That is why I hope that the hon. Gentleman will agree that it is essential that the order is approved so that the money will be available for the board for grants and the necessary training within the industry.
The levy is expected to raise a total of about £42·5 million. An occupational levy is proposed on the main part of the construction industry. That is a set amount for each occupation but subject to an overall limit of 1 per cent. of employers' wage bills.
As the hon. Gentleman will appreciate, occupational rates vary according to the type of craftsmen trained. The board believes that that system reflects the extent to which it meets the training needs of various categories of workers. Levy rates, therefore, reflect the specific training costs and needs of each occupation in the industry. I am pleased to say that the occupational rates remain largely unchanged from last year.
It may be appropriate if I were to say a word or two about the board. As hon. Members will be aware, the board was retained following the general review of training arrangements for which I, as the Under-Secretary of State at the Department of Employment, had responsibility in 1981. It was retained because it enjoyed widespread support from industry and employer organisations. I have worked closely with the board since then, and I believe that its performance has justified this support. The chairman of the board, Mr. Leslie Kemp, his staff and all his board members, employers, trade union representatives and educationists have done sterling work. I should like to pay tribute to them for what they have done in making the youth training scheme in their industry such a success. I have today laid before the House the board's annual report for 1983–84.
As the hon. Gentleman will be aware, the Federation of Master Builders was represented on the board in June last year for the first time. I welcome that representation. I am sure that it has an important role to play on the board. It is a sensible move because I have talked to its representatives, at length, about training within the industry.
There has always been a consensus in the industry on the board's training proposals. That was demonstrated clearly last year. This order follows proposals adopted

without opposition by the board, which were approved by the Manpower Services Commission, which decided that they are necessary to ensure proper training in the industry.
However, from letters that I have received from many hon. Members, it is clear that there is still some anxiety about the proposals. The Federation of Master Builders wants to change to a payroll system of levy. Other employer organisations would reject that and say that it was tried in the 1960s and did not prove to be the best way to do things. They maintained that it proved inequitable.
All other employer representatives on the board support the proposal. I have received many letters supporting the proposals from organisations such as the Building Employers Confederation, the Federation of Civil Engineering Contractors, the Construction Plant Hire Association, the Electrical Contractors Association and the Heating and Ventilating Contractors Association.
As I said, there have been many representations from both sides of the industry. What I have said consistently to the board and to the interested parties is that it would be much better for the future if such matters were settled within the board and not by the Government. I hope that the interested parties will be able to sit around a table to discuss the best way ahead for the years to come, because they know their industry better than I do or, dare I venture to say it, anyone of us in the House.
I hope that as in the past, the board will be able to reach an agreement that will be in the interests of training for the construction industry. I know what an important role that industry has to play in the nation's economy.
I hope that hon. Members will agree that the order is necessary to bring in revenue vital for the board to meet the industry's training needs. I trust that the order will enable the board to play a significant role in the Government's training plans, especially the youth training scheme and the other objectives of the Government's new training initiative. I commend the order to the House.

Mr. John Evans: The construction industry training board levy order has almost become part of our Christmas season. Immediately before the House rises for the Christmas Recess one of its last tasks is to approve the proposals of the industry's training board, which have already had the seal of approval of the Manpower Services Commission. The one difference this year is that tonight we are debating the order at a more reasonable hour because of a happy chance of circumstances—normally we debate it after midnight.
The Labour party does not oppose this or similar orders because, unlike the Tory Government, we are strongly in favour of industrial training boards, and still bitterly regret the narrow dogmatism that brought about the abolition of many training boards about three years ago. The Minister will recall that because he was in charge of the legislation.
I wish to renew the commitment of the Labour party to the principle of re-establishing industrial training boards for most sections of British industry when we are returned to power. The Labour party believes in the massive expansion of training and educational opportunities for young people, unlike the present miserable Administration, who think only of harrying our young people into compulsory youth schemes, no matter how dead-end, unskilled or repetitious and boring they may be.
The imaginative training schemes prepared and implemented by the CITB are the sort of schemes that we


wish to establish for all our young workers. We wish to provide schemes that give them a solid start in learning about their industry, a first year of good, off-the-job training and a further two or three years of training at work in their chosen skills. I join the Minister in paying tribute to Sir Leslie Kemp, his board and all who work hard in the CITB to make a success of training in industry.
Normally the order comes to Parliament from the board without controversy. It has usually been thrashed out in the industry through joint talks between employer and employer, trade union and trade union, and employers and trade unions. That is absolutely right. Most agreements in industry should be reached after full discussions between employers and free trade unions with the minimum of interference by central Government. That is what good industrial relations are about. It is time that the Government realised that and shaped the whole of their industrial relations policy accordingly.
However, it cannot be said that this order has come to us free of controversy. A major section of the industry, the Federation of Master Builders, has spent a great deal of time and money seeking to change the entire basis of the method of collecting the levy payments. It is important to note that the FMB, which, generally speaking, represents smaller builders, is not challenging the levy itself, but merely the levy's basis.
It is also important to note that if the case of the FMB was accepted and the levy was switched from a per capita basis, as it is at present, to a payroll levy, as the FMB proposes, it would represent financial savings for the majority of members of the FMB. It would also mean an additional financial cost to the majority of large firms which make up the Building Employers Confederation.
The Labour party is not taking sides at this stage because we feel that the matter should be sorted out, if possible, by those who work in the industry. Yesterday I was given information that the CITB had established a working party, one of the purposes of which is to examine the method of obtaining the levy. Another purpose is to examine the feasibility of construction industry apprentices being indentured to the CITB, rather than to individual employers. I shall return to that later.
I was informed that the chairman of the working party was to be a long-serving CITB member, Mr. Coatsworth, who is an academic, and that the FMB would be free to refer any other matters relating to the board's income and activities to the working party. However, today I heard from another source within the industry that that may not be quite the whole story. It has been suggested to me that some of the board members thought that the working party was to be established for the sole purpose of considering the problem of indenturing apprentices. My source told me that a working party was held a relatively short time ago, which returned with a hybrid proposal combining some elements of a percapita levy and some elements of a payroll levy that went some way to meeting the objections of the Federation of Master Builders and was broadly acceptable to it.
However, it is alleged that that proposition has disappeared. Nothing further has been heard of it, and the fear has been expressed to me that any working party set up now would be used as a delaying mechanism further to circumvent the demands of the master builders. I ask the Minister for a guarantee that the working party will be established quickly and that it will report quickly. Most of the data are readily available. If the working party

recommends changes in the levy that are acceptable to the board, I hope that they will be implemented in next year's order. I say that because, on its face—I accept that a detailed investigation may reveal much more than is being said now — there is some validity in the FMB's submission that there is an imbalance in what its members pay in levy and receive in grant and what the large civil engineering contractors pay in levy and receive in grant.
While I am on the subject of small and large firms, will the Minister confirm that when the construction industry training board is reconstituted in 1985 the trade unions will retain parity with the employers on the board, and that the FMB's membership will be increased so that it is more fairly represented?
I shall now deal with another aspect of the board's income and relate it to the training of apprentices. I have been given to understand that, in 1984, the total income of the CITB was about £84 million. Of that, about £45 million was raised by the levy on employers, and no less than £35 million was income from the Manpower Services Commission for youth training schemes run by the CITB. About 18,000 or 19,000 youngsters are part of CITB youth training schemes, thus making it one of the biggest participants in the YTS. Indeed, I am led to believe that the entire first-year trainee intake in the construction industry was Government-funded youth trainees. Will the Minister tell me, if not tonight by writing to me later, how many of those trainees went on to enjoy full apprenticeships in the construction industry? That important information should be available to the board and to the Minister because of the claims made by some Ministers about the number of YTS trainees who have gone on to full employment.
The majority of CITB youth training schemes are praiseworthy; if all youth training schemes were of such a calibre, we would not have the ridiculous spectacle of Tory Cabinet Minister seriously suggesting that young adults should be deprived of their pitiful £17·30 supplementary benefit if they refuse, for example, to pack supermarket shelves for £25 for a 40-hour week. The Government should provide the choice and opportunity of training, not the Hobson's choice of youth coercion or empty pockets.
Another serious point is that some people in the construction industry have raised the question of the industry's apprentices being employed by the CITB instead of by the individual employers. In a television interview yesterday, the Prime Minister said that she was in favour of a two-year training scheme for all those aged between 16 and 18. The introduction of such a scheme, funded by the MSC, would go a long way to bringing about the highly desirable policy of all apprentices being indentured to the industry's training board. That would end the appalling and frequent spectacle of young apprentices being thrown onto the dole halfway through their apprenticeships when their employers go into liquidation — a not uncommon happening in the construction industry. I assure the Minister and the House that if the Prime Minister institutes a comprehensive and well-financed two-year training scheme she will have my and my party's fullest support.
The background to the debate on this order is the announcements today from the Secretary of State for the Environment and the Secretary of State for Wales of the substantial cut in capital expenditure by local authorities which, whatever else they do, amount to another massive


setback for the construction industry, which is already laid bare by the successive blows that it has received from the Government. I did not hear the Secretary of State for the Environment deny that his announcement would mean redundancy for some 100,000 workers in the construction and related industries.
The question, "Training for what?" is entirely relevant in this industry today, and it is undeniable that a substantial amount of local authority expenditure finds its way straight into the private building sector. Because of these announcements, there will be a further crop of closures and bankruptcies of building companies that will not be able to pay the levy to the board, which will further reduce the board's income. The construction industry training board faces a difficult, if not bleak future. It needs all the good-will in the world, and it has the goodwill and best wishes of the Labour party in its work. That is why we shall not be opposing the order.

Mr. Andrew Hunter: I welcome the opportunity to speak in this short debate. I make no secret of the fact that I have received the strongest representations from firms and individuals in my constituency on one aspect. What I shall now say reflects the approaches which I have received from these interested parties, but nevertheless they are views that I accept and endorse personally, without qualification.
My first point is one of regret. I regret that debate and contention have entered into the construction industry levy board's affairs. In this respect, I welcome the comments made by my hon. Friend the Minister a few minutes ago. As I understand it, the proposals now before us were agreed to at a training board meeting in April. I further understand that in course of time the Manpower Services Commission approved the proposals, which were duly recommended to the Secretary of State. I am told that no objections were made by the Federation of Master Builders until a few weeks ago. This "holding of fire" is hard to understand, let alone applaud.
Representatives of the building industry in my constituency, not least two respected local firms, H. N. Edwards and Maurice Smith, have told me that other organisations represented on the levy board have publicly urged the Federation of Master Builders to try to resolve this dispute by means of discussion within the industry. It is sad and unfortunate that the federation has declined this invitation.
My second point is that the case being made by the FMB—I do not derive any satisfaction or pleasure from entering into dispute with the federation — contains weaknesses and flaws, as I understand the case which has been put to me. As we know, the federation bases its argument—the hon. Member for St. Helens, North (Mr. Evans) referred to this—on the belief that the present dual system of levy arrangements — the per capita system and the raising of levies on labour-only payments — is unfair to smaller builders. That view is not generally shared in the ranks of the small builders.
The Federation of Master Builders does not have a monopoly of the interests of the smaller builders. As I understand it, all other employers' organisations represented on the levy board support the per capita system. Furthermore, the Building Employers

Confederation, among others, has convincingly pointed out the fallacies in the Federation of Masters Builders' argument that small builders are being penalised by the present system. It should be remembered that companies on the training board register whose annual payroll is less than £15,000 a year are specifically exempted from paying all the levy. The significance of this increases when we bear in mind the fact that the smaller companies receive over £3 million a year from the board in training grants.
Much the same applies to companies with an annual payroll of between £15,000 and £30,000 a year. About £1,500,000 is raised in levy from such firms. That is a considerable amount, but all but 5 per cent. is returned in grants. Surely that creates no burden. Indeed, on 27 October, a written answer revealed that about 83 per cent. of the levy is handed back to companies of all sizes in training grants.
If we bear those facts in mind, and not least the fact that the majority of small firms are not members of the Federation of Master Builders, the federation case begins to look flimsy. The Building Employers Confederation believes that many small firms would actually pay a higher levy if the percentage-of-payroll system were introduced. If that is so, the federation argument is self-defeating.
The employers confederation claims that the federation has overlooked the fact that substantial amounts of training board levy come from self-employed operatives. About two thirds of the total levy from the building sector is being raised this way this year. The counter-charge against the Federation of Master Builders is simply that it has got it wrong. The present system does not penalise or victimise the smaller builder.
The levy order should be made without delay. I accept some of the sentiments expressed by the hon. Member for St. Helens, North (Mr. Evans). It is hard to over-estimate the importance of the construction industry to our economy. Likewise, it is hard to overstate the importance of the training board's work. I think that I have a sympathy for training boards with which the hon. Member would approve.
The training board is, among other things, the largest single managing agent of the youth training scheme. If the levy order were not made, or if it were even delayed, confidence in the training board would be affected profoundly. Firms have already undertaken training in the expectation of receiving training board grants. Their financial difficulties would be acute.
A delay in making the levy order might compel the training board to draw on its reserves. That could have disastrous repercussions. It could damage the board's successful YTS programme. If the board were compelled to draw on its resources, it would encounter severe problems in continuing to run its four training centres which are attended by 20,000 trainees a year.
For those reasons, set out briefly, I believe that the order should be approved.

Mr. Bernard Conlan: The comments by the hon. Member for Basingstoke (Mr. Hunter) are astonishing in some respects. He explained that his interest was aroused by representations from constituents who were members of the Federation of Master Builders.

Mr. Hunter: I did not say that. The people to whom I referred were not members of the Federation of Master Builders. I am sorry if I gave that impression.

Mr. Conlan: I apologise. However, the hon. Gentleman denounced the proposals by the Federation of Master Builders.
I take part in the debate simply because of representations made to me by members of that federation. I was impressed by their case. The hon. Member for Basingstoke said that their case had been put only in the last few weeks. That is not so because they have made that case for many years.
The Minister conceded that the federation, in spite of representing 20,000 small and medium-sized firms in the building industry, had no representation on the board. It was only because of the generosity, understanding and sympathy of the Secretary of State for Trade and Industry and the Minister of State—I pay tribute to the part that the hon. Gentleman played as well—and the feeling of a need to give representation to the federation that it was given, belatedly, one seat on the industrial training board. That one seat was balanced by one additional seat for the trade unions.
The case for the payroll levy has been advanced by the federation over a long period. I pay tribute to the work that the board undertakes. It is doing an extremely fine job of work in providing training in a difficult and complex industry and I pay tribute to both sides of it, but that does not mean that we must accept everything that it does. If some of my remarks appear to be critical, that is not because I condemn the general view that the training boards for the construction industry and many others are indispensable. I make these remarks because I think that changes are required urgently.
It is admitted readily that there are fundamental differences of opinion within the industry on the method of raising the levy. The federation goes for a straight payroll levy, which would be simple to administer. However, there are others who differ fundamentally with that approach. When the Conservative Government came into office there were 24 training boards and there are now a mere seven. It is astonishing that every other training board, with the exception of the offshore petroleum ITB, raises its levy by the payroll method. The offshore petroleum ITB has an entirely different system which is possibly even simpler. It relies upon contributions that are made by its member firms. Only the construction ITB has a convoluted, difficult to administer and confusing method of raising a levy. Not only that, it is controversial.
It is not only the Federation of Master Builders that is crying out for changes. The Minister said last year that every member of the training board was in support of a per capita levy but he did not go that far this evening. He said that the proposition was approved by the board earlier this year without objection.

Mr. Peter Morrison: I think I said that the order came forward following proposals that were adopted without opposition from the board.

Mr. Conlan: I suppose that we are playing with words. Does "without opposition from the board" mean that members of the board supported the recommendations on a split vote? Did they divide? Were there any dissenting voices within the board when it discussed the matter? That is all I am saying. I am surprised that the Minister can

come here tonight and say that there was no opposition from the board. Is that so? The Minister nods, so it must be. I am surprised to learn that.

Mr. Hunter: Perhaps the hon. Gentleman should not be surprised if he bears in mind the fact that the Building Employers Confederation has demonstrated that a levy based on the percentage of payroll would mean a greater levy being imposed on smaller companies.

Mr. Conlan: I understand the difficulties. The larger firms object to paying more, but the basis of the argument is that the larger companies, under this arrangement, are not paying enough and the small firms are paying too much and doing most of the training.

Mr. Richard Holt: Much of the argument is related to the levy. Surely the real thing is the balance between the levy and the grant. It is the difference between the two that is important. When I was responsible in the furniture industry, we made a profit on our levy. Therefore, the argument about the levy in isolation to the grant is a non-argument.

Mr. Conlan: I readily admit that the two are related. I shall come to that point later.

Mrs. Gwyneth Dunwoody: If my hon. Friend gets the chance.

Mr. Conlan: That is a matter for Mr. Deputy Speaker.
The proposal for a payroll type of levy is not new. It existed in the industry until 1970, and still exists in every other training board. The Manpower Services Commission, in a letter to the industrial training board's planning services committee as recently as 1979—only five years ago—asked that committee how soon it could adopt a percentage-based approach in line with the other industrial training boards. Therefore, even the MSC was concerned about those arrangements and was asking specifically whether the training board could move towards a system based upon a payroll rather than a per capita system.
There must be changes. I think that the Minister will recognise that changes must be made. The Federation of Master Builders has been given assurances — I do not know how strong they were — both formally and informally that it would move gradually towards a different system, which would be simpler, more efficient and more equitable. That is all that the members of the federation are asking for. They are not pleading poverty. They will not go round with a begging bowl. They are saying that they are prepared to play their part, to pay their full costs and to do the training that is required of them. That is a fair and reasonable approach.
I understand why there was a move from the payroll to the per capita sytem in 1970—it was because the big civil engineering contractors that do not employ many skilled craftsmen felt that they were paying too high a proportion of the total cost of the board's operations. Presumably, those arguments still apply today. In the industry, building service firms are required to engage and employ a high proportion of skilled labour to carry out their function. They are different from the civil engineering contractors, who manage largely en labour-type operatives. Clearly there is an imbalance. If that is the case, why cannot a method be devised by the industry training board to segregate those elements with a high preponderance of skilled labour from other elements,


which largely exist through the use of labour-type operatives? If that could be done, the anomaly of one section of the industry claiming that it subsidised the work of another would disappear.
I am impressed by the words that frequently appear in the papers I receive from the industry training board. Everyone is seeking a solution to this problem, and there are regular calls for efficiency, simplicity and equity. That is also sought by the Federation of Master Builders, and it is a principle that every hon. Member can endorse.

Mr. David Penhaligon: I begin by making absolutely clear how much I support the general concept of the order. I believe that the 1984 legislation, from which all this flows, was in concept and effect among the most successful legislation enacted during those years.
To an extent I must declare an interest, because at one time I benefited substantially from training through an industrial training board. It was not the board that we are now discussing, but the principle is the same. This was a good idea in 1964, and it is a good idea now. I am delighted that this board is very much alive and well, and so far as I am aware, no hon. Member from any quarter of the House is arguing that it should be abolished.
There is merit in training. I cannot recall any economy on this great planet in which the difficulties with which a government have had to deal have been caused by too many skills and too much training among their work force. Even in the situation we now face, when manifestly one fears there is not enough work to employ the skills available, I would argue vigorously that we should prepare for a recovery. The nation would do itself a service if it concentrated more of its mind and its resources on training and an improvement in general skills. I am a bit of a training fanatic. It is good, and those who encourage it deserve praise.
The hon. Member for Gateshead, East (Mr. Conlan) referred to the argument, of which we are all aware, about whether this should be based on payroll or per capita. As a layman looking in from outside, my conclusion is that there is much to be said for a payroll levy. That is a fair and sensible way of reflecting the size and significance of various companies, not to mention the value they place on the skills they employ. What better sign of a company's value of a skill can there be than what it pays the personnel involved? Having read the arguments, I see strength in the case put forward by the Federation of Master Builders. In principle, therefore, I believe that the arguments it has put forward should be investigated with vigour.
The Federation of Master Builders believes that small firms receive less than their fair share of the repayment and that small firms do more than their fare share of training. The belief is that the smaller firms are making a bigger training contribution than their size warrants but that they are not receiving reasonable recompense for their efforts. My attention has been drawn to a letter dated 6th March 1984 from the head of CITB's planning services. It says:
I have looked at the trainee ratios based on levy returns. These would appear to indicate that the smaller firm employs proportionately more trainees than the larger firm".
The letter also states that smaller firms appear to train more than their fair share.
Given the sums of money involved and the number of years that the CITB has been in existence, the inadequacy

of the statistics is amazing. The argument revolved around assumptions rather than the statistics which the board could have accumulated over 20 years.

Mr. Conlan: The Minister chided me when I asked a parliamentary question about this problem. He replied that the cost of a reply to the question was £700. So what?

Mr. Penhaligon: I saw that. It might be of interest if all questions asked in this House were costed. There might be times when information is obtained at quite considerable cost—at far greater cost than the value of information obtained. There is observable truth in the argument that smaller firms generally employ people with more skills than do larger firms. I suspect that this is due to the way in which companies plan their work.
There was a time when a working party of the CITB reached a compromise. We are told that that compromise was unanimous. It argued for a mixed per capita and payroll scheme. I have not received a satisfactory answer about what happened to that scheme. The Minister could be very helpful if he could refer specifically to why the compromise agreement of 1972 has never seen the light of day. It has been mentioned twice in the debate and seems to be relevant. It is one of the reasons why some are cynical about yet another inquiry. A unanimous compromise was reached but that compromise has bit the dust.
The Minister will have seen the figures relating to the differences. Small payroll firms—15,000 to 30,000—pay in something like £1·1 million. Under the payroll system that would go down to £0·6 million and under the compromise to £0·73 million. That is nearly £400,000 in terms of the transfer of levy away from smaller companies. That sounds a substantial sum. One would obviously like to hear any counter-argument.
The next band up is the £30,000 to £60,000 a year payroll company. They currently pay £1·8 million. Under the compromise they would pay £1·3 million. Under a payroll system they would pay £1·1 million. One has to get near the top, the £200,000 to £300,000 a year payroll company, before one sees a percentage difference which is less. They now pay £1·6 million. Under the compromise they would pay £1·5 million. Under the payroll system they would pay £1·4 million. One has to get to a turnover of £1 million or more a year in terms of wages, of which there are apparently 750 companies, before there is a significant transfer the other way. They currently contribute £10·9 million. Under the compromise they would pay £12·4 million. Under the payroll system they would pay £13·5 million.
The Federation of Master Builders has at least asked enough questions and made enough points to demand something rather more significant and substantial from the Minister or the training board to explain why the present system is worthy of support.
I am sure that the Minister is aware that from the outside one fears a little bit of conspiracy in the CITB on the employers' side. One suspects that the larger enterprises have a large portion of the say. One fears, or is suspicious, or thinks that it is a remote possibility, that the larger companies may well be in favour of a system which obviously shifts the load down to those who are not strongly represented. I am sure that the Minister has been in politics long enough, as I have, to be familiar with the


situation where sections of an industry decide that the fair arrangement is for somebody else to pay. One fears that there is a tendency in that direction.
It would be interesting to hear the Minister explain why the different levies have been selected. I notice that somebody trained in mechanical engineering is paid £85, and in electrical engineering £75 and that a craftsman is paid £71. I must admit that, as a mechanical engineer, I have always thought that they were far better trained and more value than electrical engineers, but I am not sure that an analysis of the training of the two would back that argument. Why is there a £10 difference?
One of my objections to the scheme is that it discourages the sort of flexibility of skills that are demanded in many building sites. Not all that many people, especially in smaller companies, are employed purely for their mechanical or electrical engineering skills, or purely for their craftsman skills. There is at least a flexibility at the edge. As somebody who believes that we should be encouraging a flexibility at the edge, I think that the levy scheme could well encourage a regimenting of people's skills that I would not appreciate. It seems reasonable to ask why there should be a difference and I would appreciate an answer.
The hon. Member for Basingstoke (Mr. Hunter) argued the big companies' case. He referred to the answer which said that 83 per cent. was repaid. I am sure he is aware that it is now admitted that that answer is wrong. The figure is nowhere near 83 per cent. If he looks at the chart from which he got the 96 per cent. figure, he will see that that is the only group that got over 83 per cent. Manifestly, the average cannot be 83 per cent. It must be in the order of 73 per cent. The fact that that answer is wrong — I suspect it is the simplest question of all to answer—makes one a shade suspicious of other statistics.
Another point that is often made is that those companies with a payroll of less than £15,000 a year make no contribution. A company with a payroll of less than £15,000, even with wage rates in my part of the world, probably does not employ three people. We are talking about something small. I stand to be corrected but I am told that that sort of company would often offer to subcontract particular skills on a bigger job. The reality of what happens is that the big contractor collects a payroll out of a part of its labour-only expenses. It is passed on by the bigger company. I do not make any complaints about that. It sounds a good way of getting the money. However, it would be unfair to pretend that a two-man building company does not make any contribution when it is having a percentage of its labour-only contract taken out of its labour contract and paid in by the bigger companies. I suspect that at least some of the apparent generosity is not quite so simple, if one pays nothing and gets £3·9 million back.
I am sure that no one will vote against the order. I shall certainly vote for it because I believe in training. Nevertheless, by dint of persistence, the Federation of Master Builders has put up a number of questions which deserve to be answered in far more depth than hitherto. The quality of argument put up by those who defend the present system is simply not adequate backing for a system entering its 14th or 15th year. I therefore welcome the inquiry, but I hope that it will achieve something better than the conclusions reached when these matters were last investigated in any depth.

Mr. Richard Holt: I had not intended to intervene, but much of the debate, to which I have listened carefully, has concerned finance and very little has concerned training. The two options discussed have been a per capita and a payroll basis. The Government might care to consider whether payment by results would be more in keeping with today's needs.
I speak as a former chairman of the furniture trade industry training board dealing with apprentices in the London area. In my experience the need to pass examinations or to obtain skills was the least important consideration for either employers or trade unions. The most important thing was to ensure that the levy form was filled in and the maximum grant obtained, irrespective of the standard of training achieved by the young person concerned. I suspect that matters are not very different in the construction industry. I doubt whether there is any rule that youngsters entering the industry must go to a training college and achieve a good standard in their examinations before any levy or grant is paid.
All too often, we look at training from entirely the wrong angle. We should be considering whether we are training enough people properly in the skills required for the future. In this context, I commend the attitude of the Electrical, Electronic, Plumbing and Telecommunications Union, which has approached this nationally by encouraging a far larger number of young people to come into the industry and to be trained adequately, the criterion being not whether they have lived long enough or whether the levy has been paid or the grant received, but whether the employers and trade unions are satisfied that the young person is competent to go out into the world and say, "I am an electrician."
I was horrified, though, to hear from the Labour Front Bench the suggestion that there might be an apprenticeship to the construction industry training board. That is a horrific prospect. Any employer would immediately wash his hands of his apprentices because it would all be the responsibility of the CITB — elected, appointed, or however it might be constituted at the time.

Mr. Evans: Is the hon. Gentleman aware that there are strong arguments within the industry that employers should be indentured to the CITB? Far from employers washing their hands of apprentices, the position would be far better than it is now, when every year thousands of apprentices find themselves on the dole queue because their employers have gone bust and there is no other work for them. That would not happen if they were indentured to the CITB.

Mr. Holt: It would still happen if very large numbers were involved, but it would not improve the training of the youngsters, which is the kernel of my argument. We must not argue about money all the time without looking at the skill side.

Mr. Evans: With the greatest respect, that is exactly what the order is about.

Mr. Holt: I understand what the order is about, but related to the order is the work content that goes with it. If you do not understand that, that is a bad thing for the Labour party.

Mr. Deputy Speaker (Mr. Harold Walker): Order. I have a very good understanding of these matters.

Mr. Holt: I realise that, Mr. Deputy Speaker. I apologise profusely to you. I meant that if the hon. Member for St. Helens, North (Mr. Evans) does not understand that there is a correlation between the content of training and the money involved, that is hard luck for the Labour party—although we know that the party is in its death throes in any case.
I had not intended to make a political speech. I am concerned about young people. I am interested in their training. That is why I attended the debate. It is a pity that there are not more Labour Members here, demonstrating their interest in young people and in training.

Mr. Evans: It is a good job that there are not more Conservative Members present. They might all have made speeches as appalling as yours.

Mr. Holt: Was that another reference to you, Mr. Deputy Speaker?

Mr. Deputy Speaker: It was a general reproach, not specifically directed towards the hon. Gentleman.

Mr. Holt: I hope that my hon. Friend the Minister will accept that we all want the order to be passed. However, the discussion must not be limited to an argument between two sectors of employers in the industry, and the way in which the levy and the grant are carved up. We must think about the young people and the needs of the future, and make an assessment of what is required. If there is to be an annual exercise of filling in forms and seeking to maximise the amount of money that can be received back by way of grant to set against the levy, irrespective of whether the youngsters involved ever do any of the jobs required of them or attain any skills, the country will be in a bad way.
It is time for a thorough investigation, taking in more than the CITB. However, I want to use this debate as a coat-hanger for discussing all elements of training. When I was responsible for signing indentures, together with the responsible trade union official, our only criterion was whether the person involved had lived long enough. The young people did not have to pass any examinations or present any work. I suspect that that is true in the CITB to this day. Before we say that someone is an electrician, a bricklayer, a joiner or a plasterer, we should ensure that indentured apprenticeships are meaningful and that the financing of the apprenticeship is a secondary and not the primary consideration.

Mr. Peter Morrison: I entirely agree with my hon. Friend the Member for Langbaurgh (Mr. Holt) that the debate should be about training and about the quality of training in the construction industry. I also agree with his comments about standards as opposed to time-serving. A greater emphasis on standards is one of the objectives which the Government — and, I believe, the CITB — wish to attain as quickly as possible.
Inevitably, the debate has been about the altercation —if that is the right word—between the two employers' associations in the building industry. In my opening remarks, I was at pains to express my hope that the industry would be able to sort out its own training problems. Like the hon. Member for St. Helens, North (Mr. Evans) I hope that in the weeks and months ahead the working party to which he referred will sit down and work out the best way in which to proceed. I do not believe that

the House is best qualified to find a solution. I believe that it would be much better for the industry to do so itself. In the meantime, I will do what I can to bring the parties together, as I have tried to do during the past three months.
My hon. Friend the Member for Basingstoke (Mr. Hunter) expressed his regret that there should be a debate between the two employers' associations. Such differences of opinion are an inevitable fact of life. We must look to the future — as does the hon. Member for Gateshead, East (Mr. Conlan)—rather than to what may have happened in the past. I hope that the parties concerned will look to the future and try to resolve their differences of opinion.
The hon. Member for Truro (Mr. Penhaligon) said that he is glad that the board is alive and well and that he is a training fanatic. Having been responsible for these matters, first as an Under-Secretary of State and now as Minister of State, for nearly four years, I cast myself in the same category. I believe that training is incredibly important. It is an investment which should be hoisted high on the list of priorities. The hon. Gentleman and I are at one on that. He asked about the occupational levy. Different occupations get different levies and the industry, through the boards, decides what the levy should be for each occupation. I hope that he agrees that the best people to make that decision are employers, trade unionists and educationalists rather than he or I, who are not working so closely with the industry.
The hon. Member for St. Helens, North started by being somewhat controversial about the youth training scheme. I suppose that we have grown accustomed to that but his remarks were somewhat misplaced. The scheme costs the taxpayer about £800 million, the trainees believe that the scheme is impressive and constructive and yet the hon. Gentleman said, in the context of the CITB, that it has had an amazing outturn figure. Of the 18,000 or so trainees who were last year under the CITB managing agency, some 90 per cent. who have completed their training have gone on into further skills training. I wonder whether he is able to point to such a good record at any time between 1974 and 1979 when his party was in power.

Mr. Evans: Did the Minister not understand that I was not criticising the youth training scheme as it affects the CITB? I was criticising the many other schemes such as the packing of shelves in supermarkets, which are an abuse of training schemes. I suggested that every scheme should be as good as the CITB one.

Mr. Morrison: That is interesting. The hon. Gentleman would have us not approve the youth training scheme when the managing agency is Sainsburys where, if my memory serves me correctly, there was a 500-place scheme, after which virtually 100 per cent. went into a job. The hon. Gentleman does not like that either. The hon. Gentleman must substantiate what he said. If he does not like such schemes on which the placement rate is so outstandingly good, I must report that that is what the Labour party feels.
I am sure that industry has listened carefully to what the hon. Member for St. Helens, North said about the reintroduction of statutory training boards. I hope that, on consideration, he might think again. Surely he agrees that training is better done if it is done voluntarily, whether in a statutory or a non-statutory system. It is better done because it is done with conviction and commitment. I am


delighted that the hon. Gentleman commends the order to the House — it is for the good of training in the construction industry.

Question put and agreed to.

Resolved,
That the draft Industrial Training Levy (Construction Board) Order 1984, which was laid before this House on 3rd December, be approved.

It being Ten o'clock, MR. SPEAKER proceeded to put forthwith the Questions which he was directed by paragraph (2)(c) of Standing Order No. 19(2)(c) (Consideration of Estimates) to put at that hour.

SUPPLEMENTARY ESTIMATES, 1984–85

Class IV, Vote 5

Question,
That a supplementary sum not exceeding £45,000,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in the course of payment during the year ending on 31st March 1985 for expenditure by the Department of Energy in connection with the energy industries including related research and development, selective assistance to industry, energy conservation, oil storage, and certain other services including grants in aid and an international subscription.

put and agreed to.

SUPPLEMENTARY ESTIMATES, 1984–85

Question,
That a further supplementary sum, not exceeding £2,988,733,000 be granted to Her Majesty out of the Consolidated Fund to defray charges for Defence and Civil Services which will come in the course of payment during the year ending on 31st March 1985, as set out in House of Commons Papers No. 7, 29 and 101.

put and agreed to.

ESTIMATES, 1985–86 (Vote on account)

Question,
That a sum, not exceeding £40,938,087,000, be granted to Her Majesty out of the Consolidated Fund, on account, for or towards defraying the charges for Defence and Civil Services for the year ending on 31st March 1986, as set Out in the House of Commons Papers Nos. 8, 9 and 28.

put and agreed to.

Bill ordered to be brought in upon the foregoing Resolutions by the Chairman of Ways and Means, The Chancellor of the Exchequer, Mr. Peter Rees, Mr. John Moore, Mr. Barney Hayhoe and Mr. Ian Stewart.

CONSOLIDATED FUND

Mr. John Moore accordingly presented a Bill to apply certain sums out of the Consolidated Fund to the service of the years ending on 31 March 1985 and 1986; And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 41.]

Heavy Lorries

10 pm

The Secretary of State for Transport (Mr. Nicholas Ridley): I beg to move,
That this House takes note of European Community Documents Nos. 4088/79, 9292/81 and 9508/84 and the unnumbered Draft Directive submitted by the Department of Transport on 13th December 1984; and notes with satisfaction the position adopted in relation to the Draft Council Directive on the weights, dimensions and certain other technical characteristics of certain road vehicles.
I apologise to the House for the short notice given in arranging this debate. The Scrutiny Committee recommended debates on weights and dimensions in 1979 and 1981 when the first two documents mentioned in the motion were deposited. During the intervening period, the Government have stuck firmly in the negotiations in Brussels to the undertaking on lorry weights given in the House when the regulations were presented just over two years ago by my right hon. Friend the Member for Guildford (Mr. Howell). He stated:
We do not accept the higher limits proposed by either the European Commission or any other European body. We also reject the higher limits on axle weights, because they would not be acceptable on our roads."—[Official Report, 25 November 1982; Vol. 32, c. 1022.]
The draft directive has been on the agenda of every Council of Ministers meeting since then, but, despite provisional agreements earlier this year on some parts of the directive, it was only last week on 11 December that an agreement was reached on a modified package. The urgent need to settle the matter now arises not because of anything in the weights and dimensions package but because of the linkage between the package and agreements to increase the Community quota for road haulage and to allocate moneys under the infrastructure fund for 1983–84. This goes to support some of our most important road schemes. This money will cease to be available if it is not paid by the end of this year, and hence there is the need for the debate tonight.
We are not seeking to overturn the commitment given in 1982 by my right hon. Friend the Member for Guildford. We are not asking the House to agree to increase the maximum lorry weights for any type of lorry. I would not recommend the directive if it contained proposals to allow heavier lorries on our roads. The directive does not do so, because we have successfully obtained a derogation in respect of weights for ourselves and the Irish which is of indefinite duration. Moreover, there is now no prospect of increased maximum weights being imposed on us by majority decision of the Council without approval by Parliament. The directive makes it clear that any future decision on this subject can only be taken by unanimous vote; thus our position in Europe on lorry weights is actually strengthened.
The terms embodied in the draft directive were obtained as a result of hard bargaining in Brussels last week. They represent a deal which I recommend the House should endorse. The position is as follows. The United Kingdom is not yet committed to this directive. Last week, nine member countries indicated that they were ready to accept the directive, together with the derogation to which I have referred. Knowing the great interest that the House has taken in the subject in the past, I said that I would have


to submit the terms to Parliament, and our European colleagues accepted this. So the position of this House has been fully preserved.
The directive sets only lower limits on the maximum weights or dimensions that a member state may permit. It does not, therefore, require a member state to reduce any limits to conform to the Community values. The directive applies only to vehicles when used in international traffic; thus member states can continue with their national rules governing the registration and type approval of vehicles. All they are required legally to do is to admit vehicles in international traffic if they conform with the weights and dimensions set out in the annex.
I come now to the weights proposals themselves. First, the detailed weights limits, apart from those on which we have secure derogation—of which more in a moment—either agree entirely with the limits in current United Kingdom regulations or are in fact lower than our own limits. This is an excellent result for us. It means for example that many of the trailer axle weights and spacings with which our operators are accustomed and to which our manufacturers build are to become the common European standard.
There is only one significant change that we will have to make to our regulations before July 1986 when the directive comes into force. This concerns not weight but the maximum length of rigid, non-articulated, motor vehicles, now specified as 12m, compared with 11m in our regulations. In fact, the vast majority of rigid vehicles — generally the lighter two-axle lorries — are built substantially shorter than 11m anyway, so the maximum length limit for this type of vehicle has little effect. It is possible that some specialised vehicles, such as furniture vans, will become up to a metre longer if the industry finds it worthwhile to exploit the opportunity provided by the change in our regulations. The change will bring the length limit on these vans into line with the existing 12m length limit on coaches. Such rigid vehicles will remain much shorter than the heavier articulated vehicles already in use on our roads. There is thus no increase in the maximum size of lorries, and none of the proposals for increased weights, other than those which are the subject of our derogation, would differ from weight maxima currently allowed.
The crucial article for us is article 8. This provides the United Kingdom — Irish derogation. This is the new feature in the directive that did not exist in the Commission's earlier proposals. It results from our insistence over the past two years, following Parliament's decision in favour of a weight limit of 38 tonnes for the United Kingdom that we were bound by our pledges to Parliament. The ninth "Whereas" clause and article 8 set out the terms of the derogation. I can assure the House that these leave the United Kingdom Government and Parliament fully entitled to maintain our current limit for the heaviest lorries, for as long as we see the need to do so.
Our Community partners have now accepted, after a good deal of persuasion, that we indeed have a genuine problem with our older bridges. The fact is that the 40 tonne lorry in its commonest form—the two-axle tractor and three-axle semi-trailer—inevitably has axle weights which are significantly higher than those for which our bridges have been assessed. We cannot permit such lorries

to use our roads in their present state. A lengthy programme of work would be needed before we could even consider accepting these heavier axle loads on our roads and bridges.
The first paragraph of article 8 sets out the scope of the derogation. The first subparagraph means that 40 tonne limits for articulated vehicles and road trains and the 24 tonne limit on the most widely spaced tri-axle, do not apply in the United Kingdom and Ireland. The second subparagraph means that we must none the less accept articulated vehicles of 38 tonnes with a tri-axle of up to 22·5 tonnes. Those are in fact our present limits, so this causes no problem for us.
The second paragraph makes it clear that the derogation applies without limitation to "Road Trains", that is, drawbar trailer combinations also. This means that the United Kingdom can maintain its existing limit of 32·5 tonnes on drawbar trailer combinations. Thus we continue to honour the commitment in its entirety.
Maintenance of a lower limit on these large drawbar trailer lorries was a provision upon which Parliament insisted in 1982, and despite the fact that this was the hardest of all for our Community partners to swallow, the Government have insisted, successfully, that it be covered by the derogation.
In terms of bridge loading and road damage there is no sound justification for maintaining a lower limit on road trains than on articulated vehicles—indeed, the reverse. The effect of this provision in practice is to discriminate against foreign operators who make greater use of these vehicles than British hauliers. Maintenance of a lower limit on road trains was nevertheless a provision upon which Parliament insisted in 1982, and therefore the Government have insisted that it be covered by the derogation.
The second paragraph of article 8 requires the Council to lay down a procedure for the periodic review of the derogation. A proposal must be made by the Commission within the next 18 months, and the Council has to make a decision by 28 February 1987,
According to the provisions of the Treaty.
But the preamble—that is the 9th "Whereas" clause—makes it clear that our Community partners have accepted that the part of the treaty of Rome relevant to this decision is article 75, paragraph 3, which provides for unanimous decision. So the United Kingdom retains complete control over these arrangements. We cannot have higher limits forced upon us by majority decisions. If the Council fails to agree upon the terms of the review procedure by 1987, the derogation remains in force.
Therefore, there is nothing in the directive which is harmful to our interests. It has to be said that the benefits are not dramatic either, but they are worth having. The degree of standardisation helps our exporters, although only a minority of goods vehicles is covered. It is also valuable to agree common standards on certain weights and dimensions, such as the weight upon unpowered axles, the trailer weights and the dimensions of the biggest vehicles, which will discourage any upward drift in national legislation elsewhere in the Community.
Those are limited benefits. The main benefit we seek is to have a common market in road haulage. We believe that it is profoundly unsatisfactory that the largely free market in goods that exists in the EC does not extend to the services sector—especially to transport. It is quite intolerable that, 27 years from the start of the Community


and 12 years after our own accession, lorries such as ours, which meet all the national standards of other Community countries, should nevertheless be subject to strict quota restrictions and be unable to make journeys in the EC without a permit. We have not succeeded in getting a firm timetable for the abolition of quotas as yet. But we shall keep trying.
Meanwhile, at last week's Council, we got agreement to more than double the Community lorry quota over a five-year period from 1985 to 1989. That is a major step forward, which will offer considerable opportunities to our road haulage operators. The increase is linked by other EC Governments to our adopting the weights and dimensions directive. It stands ready for adoption tomorrow, but only if the weights and dimensions directive is also ready for adoption then.
There are other worthwhile measures that are also dependent on the directive as part of the same package. The regulation on the 1983–84 Community infrastructure programme includes support for the construction of the M25, the Sidcup bypass, and rail electrification in Essex. It means a total financial net benefit for the United Kingdom of about £1 million. There is also a resolution on road safety which provides for 1986 to be European Road Safety Year, and there is a minor recommendation on co-operation between the Community's railway undertakings. All these measures will go through as a package with weights and dimensions, or not at all.
There is much more to play for in the longer term. The European Council has already agreed, at summit level, that the Common Market in services must become a reality and that road haulage must be liberalised. It will take a great deal of pressure and hard negotiation to secure progress against the instincts of most member states. The United Kingdom economy stands to reap substantial benefits if this is brought about. There will be absolutely no prospect of achieving this aim if we were not to agree to the weights and dimensions directive tonight.
I commend the directive, therefore, to the House as representing a modest but significant success in our negotiations towards a Community transport policy. We remain totally committed to the undertaking given in 1982 that there should be no increase in the maximum weight of heavy lorries until our roads are suitable and Parliament agrees. We are achieving the beginnings of a movement towards liberalisation of road haulage throughout the Community, and those elements of harmonisation which we can agree to will be of value to our exporting manufacturers. I hope that the House will approve the directive.

Mrs. Gwyneth Dunwoody: It is reprehensible for the Secretary of State to present such a major change to the House so late in the Session and so late at night. My reasons for saying that are simple. There are various ways in which the Government can make changes following European legislation. One way is to consider not the political implications, but technical specifications that can be harmonised, knowing that they will have a knock-on effect on road safety and road haulage measures in Britain. I am extremely unhappy that we are talking tonight about something which the Secretary of State has represented as a modified package, and as something that we must accept or we will not get the linkage which he says exists between the infrastructure

fund and the other Community measures. The implication is that if we oppose the measure we shall be holding up the money that the Secretary of State has obtained from the budget for other transport measures.
If that is the case, we should consider carefully what the directive says. We should understand the background to it. In 1971, before Britain joined the Community, the EC sought an agreed lorry dimension scheme. In 1972, the Six agreed on some aspects, such as a 40-tonne limit, but the entry of the three new nations delayed complete agreement. In 1975, the idea re-emerged and proposals were put forward in 1976.
The Secretary of State said that the Government have given undertakings and that no one need worry because the Government will do nothing to damage British interests. That is extremely difficult to believe. The Commission is being taken to the European Court of Justice by those who believe that it is not implementing quickly enough a hamonised transport policy. The case will be heard before long. Therefore, when we talk about Britain having obtained a derogation from some basic aspects of transport policy, we must understand precisely what is meant by a derogation.
In January 1979, the main new proposals appeared for agreed lorry dimensions. The report wanted a 44-tonne limit, but that was cut to 40 tonnes in September 1981. The Government agreed to that, but the House forced them to back down to a limit of 38 tonnes. As I said, one method of moving towards agreement has been to obtain agreement on technical details. That is a useful ploy, because it reduces the number of options on lorry weights so that we impose uniformity in a different way.
On 17 and 18 September 1984, the European Parliament took the Council of Ministers to court because the latter was not implementing the treaty obligations. The Advocate General will give his opinion on 8 or 10 January 1985. That is one reason why the House is being asked to move too quickly.
Britain has some of the smallest lorries in the EC, and until 1982 the weight limit, which was set in 1964, was 32·5 tonnes. The Netherlands had 50-tonne trucks at that time. Britain also had shorter lorries than did most EC countries. Today, only the United Kingdom does not have the 18m long lorry. It is clear that United Kingdom drive axle weights are at the low end of the scale; they are 10·5 tonnes in Britain compared with 13 tonnes in France, Belgium, Germany and Luxembourg. The Commission's proposal is for an 11-tonne axle, and that was the suggestion put forward in 1972 by the Six. Traction ratios are higher by 20 per cent. in the Netherlands and 27·6 per cent. in the United Kingdom, but when there are icy conditions even the 34·2 per cent. of France is not considered adequate by the Commission.
The Government have tried, in a number of ways, to increase lorry sizes. Their White Paper in December 1981 made a lot of claims about protecting the environment but they are unfulfilled. We were told that bypasses and motorways would be the Government's high priority and local authorities' powers to control lorry movements were meant to be a major safeguard. If that is so, I ask the Secretary of State why he has been so exceedingly vocal about the GLC's attempt to impose a lorry ban, a ban that many people in London not only desire but need if they are to be able to lead a civilised life. This Secretary of State has been a party, with his colleagues, to the abolition


of many of the local authority aspects of transport, but he is nevertheless demanding a full inquiry into the GLC's proposed lorry ban. If that is not illogical, what is?

Sir John Wells: Is the hon. Lady aware that, if the GLC lorry ban were to be imposed, wholesale markets in London would grind to a halt? Heavy lorries come from the fish ports and the meat and horticultural areas night after night and go directly by main road to the market areas, where virtually nobody lives. No Londoners are disturbed by those markets and the freshness and the cheapness of food in London depends on those lorries. The plan is crazy.

Mrs. Dunwoody: I have the greatest respect for the hon. Gentleman, but he cannot be talking about the same capital city about which I am talking and he is not talking about the reality of the movement of lorries in London.

Sir John Wells: Yes, I am.

Mrs. Dunwoody: My point is vital. The Secretary of State says, on the one hand, that what concerns him is protecting the environment but, on the other as soon as any suggestion is made that a properly elected council should seek to do that, he demands a public inquiry.
This is rather more complicated than simply saying that the EEC understands that we have problems with lorry weights because of our roads. The Secretary of State says that it would not be right to go as far as the Armitage report suggests and that the Government have rejected the 44-tonne maximum, but the regulations will create an environment that will allow that change. The EEC accepts only that where there are bad roads there should be a small increase in pavement thicknesses, and that bypasses and a great deal of money spent on new roads are not required. These are not my views, but those of the EEC.
Therefore, the Government should tell us how they will avoid problems in 1987. We have already gone above the weight at which lorries cause a great deal of damage to our roads, which is 35 tonnes. These proposals will make it hard to avoid increasing the problem.

Mr. Jonathan Sayeed: I take it that the hon. Lady believes that the axle loading and the weight on pavements and roads are the really important things for the protection of the environment. What does she believe will be the axle loading under these proposals?

Mrs. Dunwoody: If the hon. Gentleman does me the minor courtesy of waiting until I develop my argument, he will find out what concerns me. The Secretary of State seems to find this amusing. Let me spell out to him what the proposals will mean for our people, because he appears to be concerned only with the views of the operators and not with the views of those who will have to live with the changes which are brought about, or those who will not find themselves new bypasses or new roads to protect their villages or towns.
The regulations do nothing to deal with overloading. Many drivers coping with container loads have difficulties, not only with weight but with the way in which vehicles are packed. The Council of Ministers does not consider the variety of roads and conditions here. Accidents happen, not only because of the speed of

vehicles, but because they are badly loaded. The slow roll, arising from a change in direction, can result in a lorry shedding its load. There is a safety problem in the change.
Momentum can have an effect in a bad road traffic accident. Extra weight has a direct effect. If I remember any science at all, it is that the momentum of a body is affected by the force with which it moves. An increase from 38 tonnes to 40 tonnes will mean that if there is a road traffic crash—

Mr. Ridley: Will the hon. Lady give way?

Mrs. Dunwoody: I look forward to the Secretary of State's interventions with what I can only call wild delight.
The Government are wrong to claim that extra weight does not affect accidents. Believe me, I know what I am talking about. An increase in weight directly increases momentum. The increase from 38 tonnes to 40 tonnes means that a crash happens with 5 per cent. more force. In the M25 crash last week, nine of the 22 vehicles involved were heavy lorries.

Mr. Ridley: Did not the hon. Lady hear me say that the directive does not involve an increase from 38 tonnes to 40 tonnes? After the directive is adopted there cannot be such an increase against our will. There is no point in arguing about 40-tonne lorries, because they are not dealt with in the directive.

Mrs. Dunwoody: The Secretary of State knows that there will be an increase in length. He knows that we are talking about 18m being the maximum. That is like taking three mini cars piled on top of each other, and sticking them on the back of the biggest lorry in Britain.

Mr. Ridley: We have had 18m lorries in Britain since 1941. No changes are proposed in the maximum length of lorries. Again, the hon. Lady is falsely interpreting the directive.

Mrs. Dunwoody: The Secretary of State insists that no basic changes are to take place, but his argument depends upon the Commission continuing to accept that Britain's roads are so bad that they cannot accommodate increased lorry weights. My point is simple. If we want to harmonise legislation throughout the Community, the easiest way is to introduce technical specifications which will have an effect upon the lorries and the movement of transport. That is what will happen under the directive. We cannot get away from that.
Drivers are worried that road safety has not been sufficiently considered. They are convinced that loading problems will be considerable. They are certain that the basic problem is that the Community intends to push ahead with the harmonisation of road transport. That has been its attitude ever since Britain entered the Community, and everything that it does has that aim in mind.
We are in danger of being told that these are small, technical changes and that we have obtained—the Secretary of State boasted of this — a derogation that is indefinite in length. He did not say that the Commission has managed to write in various limitations, which I believe that it will impose at the end of 18 months. It is talking about a move towards complete harmonisation of road transport. That is not in the interests of our environment or of our road traffic industry. There are many in our towns who will have considerable worries about the proposals before us.

Heavy Lorries

Sir Dudley Smith: I welcome what my right hon. Friend the Secretary of State said in his opening speech on this contentious issue. Anyone in his right mind and with an appreciation of the industrial and commercial necessity of heavy lorries would not say that they should all be banned. However, there is a great public resentment of heavy lorries, which pass through villages and despoil urban areas. Although heavy lorries are an integral part of our communications and industrial system, they have few friends. In Britain generally, villages are shaken and violated by heavy lorries, which over the years seem to have grown in size if they have not in reality. They have certainly increased in numbers. Pleasant urban areas are disturbed by the continual passage within them of heavy lorries and town centres are jammed almost constantly by them.
Apart from the resultant road damage, we can cope with the overall problem in the longer term—it is one which continues to increase—only by the strict adherence to routes by heavy lorries. These routes should not be confined to motorways or dual carriageways. There must be a proper appreciation of exactly where lorries can go and of loading and unloading times. As the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said, there is overloading, and it amounts to an abuse which must be checked.
The European Economic Commission, as opposed to the Community, is much less popular than it used to be, and it was never a particularly popular animal. The same applies to the Community. There is too much bureaucratic rule. I do not like the idea of a great deal of harmonisation of roads and transport and lorries and I am sure that my right hon. Friend the Secretary of State is taking the right attitude. This Government, and any Government, will rue the day when they accept a course that leads to complete harmonisation with the rest of Europe. If that happens, large areas of Britain will be despoiled.

Mr. Stephen Ross: I congratulate the Secretary of State on sticking to his guns and returning from Brussels without giving ground on his predecessor's undertaking that the 38-tonne limit will be maintained.
I listened carefully to what the right hon. Gentleman said about the duration of the derogation. Article 8 says that there will be some investigation between now and 30 June 1986 and that a report will be submitted to the Commissioners. Will we be able to hold the line after 28 February 1987, which is when a decision on the report must be made? Having heard today's announcements, we are not likely to spend £100 billion on bridges in the meantime and, therefore, we might be able to get away with it. If, by chance, the Minister of State gets her way and we spend rather more on our roads, it will be rather more difficult to do so.
The Secretary of State has achieved quite a lot under the article. It is worth while that we should be moving towards a further liberalisation of the various controls covering road transport apart from the weight limits. I hope that the Secretary of State will be able to say a little about what we are doing about safety enforcement. It is still a bit of a bad joke in this country. Weighbridge

facilities are still inadequate. Not all our major ports have weighbridge facilities, even now, and daily weighing cannot be carried out even where there is a weighbridge because the number of staff is inadequate. I am told that in many cases they are manned only between 9 am and 5.30 pm.
Therefore, there are things that we can do to improve the situation. However, having said that and asked the Secretary of State about safety enforcement, I at least am relieved to know that he has honoured the pledge that his predecessor gave to the House.

Mr. Jeremy Hanley: I welcome my right hon. Friend the Secretary of State's courageous stand on lorry weights. There was hardly any newspaper in Britain, before he went to Europe, that believed that he would argue the case for the lorry weights that he succeeded in achieving. Almost every body said that he would give in to the 40-tonner, and I believe that the fact that he did not shows not only the Government's views but my right hon. Friend's strength of purpose.
However, I must add that the last line of the Government's package refers to encouragement for lorry routing and action areas. When the M25 is complete, there will be the facility for a wide change of policy within the context of the City of London and the Greater London area. The Greater London council has proposed a lorry ban, and it would be unwise for my right hon. Friend to ignore its popularity in some of the areas that have been particularly plagued by heavy lorries over the past few years. When the M25 is complete, many lorries will be able to avoid the centre of London—I mean not just lorries of around 38 tonnes, but much lighter lorries than that. I agree that the axle weight of 7·6 tonnes per axle that my right hon. Friend succeeded in achieving as opposed to the old 8·125 tonnes per axle is an advantage, but I also agree with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) about momentum. In a domestic area with side roads, heavily built up, with slow traffic, small domestic cars, people crossing zebra crossings and with right angles such as are found on the south circular, the momentum of lorries gives rise to fears among the local inhabitants. When the M25 is complete, there should be a proper series of lorry zones dictated throughout the whole of the Greater London area to encourage lorries to go round rather than through London.
With regard to competing with our European neighbours, heavier lorries will bring more freedom of trade in the national context, but there must be the infrastructure to carry those lorries and encourage the trade that many of my right hon. and hon. Friends would like to see. The purpose of my speech is simply this. Many roads upon which our lorries now travel are totally inadequate for the purpose. It is because of political cowardice and incompetence in the past that we do not have the infrastructure that we need to carry the lorries that will help us to compete with our European neighbours. Lorry zones, lorry routes and lorry bans are the product of the fact that we do not have the lorry system that many of our neighbours have developed over the years.
We have heavy loads, heavy lorries and dense traffic. I encourage my right hon. Friend to make a statement in which the Government's intention to take lorries outside London once the M25 is complete is given clearly and unequivocally to the constituents whom I represent. To


make too wide the hours that are dictated by the GLC lorry ban and too rapid their introduction can bring only a failure of the GLC lorry ban. As I have said before, I believe the GLC lorry ban to be politically sensitive but popular. However, its introduction has been brought about more by politics than by the needs of my constituents. Further, the hours during which the ban operates are so wide as to cause deliberate friction with central Government.
There is no doubt that a lorry ban of sorts would be popular, but the hours of midnight to 6 am would be more sensible. My right hon. Friend should consider a restriction on lorries, not just within the 65 per cent. of historic towns but within historic London, which at present is subject to blight. Many London bridges should also be free of heavy lorries. I suggest that on Kew bridge alone, a lorry limit of 16, 14 or 12 tonnes is an acceptable maximum in such a conservation area.
My right hon. Friend should give close attention to a lorry ban. A public inquiry may be needed, and I believe that it would show that many of the routes traditionally used by heavy lorries in London are totally inappropriate. Lorry disgorging points should be built on the M25 to allow smaller lorries into our metropolis, although heavier lorries should be banned.
My constituents do not care a jot that heavy lorries are safer. These vehicles are totally inappropriate for domestic side roads. While I congratulate my right hon. Friend on the limit he has managed to achieve from Europe, I ask him to go even further.

Mr. Nigel Spearing: Even as a London Member, I shall not follow the hon. Member for Richmond and Barnes (Mr. Hanley) in his support for the GLC, welcome though that might be.
This matter has been before the House for some time. The Select Committee on European legislation saw the first proposals in the 1978–79 Session, and the explanatory memorandum it then considered was signed by one William Rodgers. There have been a number of Secretaries of State for Transport since then, and these proposals have evolved, not least because of some of the efforts of the House of Commons.
I understand that the negotiations on the whole package were completed as recently as 12 December. The document which emerged from that meeting is the one to which the right hon. Gentleman has referred, although there was some debate between him and my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) about its exact merit.
We are grateful for the efforts of the Secretary of State and his Department in getting this document to the House, but it is a pity that there is no explanatory memorandum. I should have thought that from 12 December until now —it could even have been drafted on the aeroplane—it would have been possible to produce an explanatory memorandum. It may be that the document was not in its final form, and perhaps I am doing the Secretary of State an injustice. My point is that the timescale for the House to debate this final package has been pretty tight. I do not necessarily blame the right hon. Gentleman, as that may be the nature of Community legislative machinery. If so, we should mark and note it. I hope that the right hon.
Gentleman will refer to the explanatory memorandum when he replies as that may cast light on the disagreement between himself and my hon. Friend.
The Government may have been somewhat coy in their signposting of this debate. Last Thursday, the Leader of the House said:
Tuesday … Debate on European Community documents on transport measures. The relevant numbers will appear in the Official Report."
The draft regulations have been before us for some time. In italics at the bottom of the column—but only seen on Friday by Members of Parliament, let alone by anybody else—we read:
"(d) Unnumbered draft directive submitted by Department of Transport on 13 December 1984". — [Official Report, 13 December 1984; Vol. 69, c. 1207.]
It is to that proposal that I now turn.
The Minister and my hon. Friend have argued about the worth of this derogation. I shall therefore read paragraph 9 into the record:
Whereas the state of certain portions of the road network in Ireland and in the United Kingdom does not make it possible at the present stage to apply all the provisions of this directive; whereas the application of some of these provisions in those member states should therefore be temporarily deferred under arrangements to be set by the Council in a decision to be taken by the end of February 1987 at the latest; whereas it is not possible to fix these arrangements in the present directive; whereas in view of the requirement for substantial improvements to the relevant portions of the road networks which will take a certain number of years to complete, the conditions referred to in Article 75, paragraph 3 are at present fulfilled in those member states and are expected to remain so that when the Council takes its decision; and whereas in consequence this decision will then be adopted by unanimous vote".
I do not intend to embark on any exegesis of that text, but all the qualifications ought to be noted—the reference to "expected to" and to the road network not making it possible at the present stage to apply all the provisions of the directive. The Minister or his successor may be able to provide a watertight defence, but the problem does not relate only to paragraph 9. Linked with the Minister's statement is the statement that the legislative document, which ought to stand on its own merits, is clearly linked to other matters, for example to the electrification of the railways. I do not understand why a legislative instrument should be linked with cash handouts, whatever their merits. What financial inducement or pressure might there be in 1987? It might be linked to putting up £1·4 million to £1·6 million. Package bargaining in the EEC is now fashionable.

Mr. Eldon Griffiths: And always has been.

Mr. Spearing: Yes. It has even crept into the document we are discussing. The Greeks want something for Mediterranean products and are holding up expansion. When the House is faced with a request for an increase from 38 tonnes to 40 tonnes, it may be wrapped up in a vast financial package and we shall be unable to do very much about it.
I do not wish to be too fanciful. Members of the Conservative party know of the predictions made by certain of my hon. Friends. It is also true to say that some of my speeches have proved to be an underestimate rather than an overestimate. Therefore, the argument between my hon. Friend and the Minister is thoroughly justified. History is on the side of my hon. Friend.

Mr. Jonathan Sayeed: I do not intend to follow Labour Members through the lurid realms of conjecture. I shall just stick to the directive.
As one who has driven a heavy goods vehicle—a 40-ft articulated truck — from London to Doha, and helped pioneer the overseas routes to the middle east, I welcome the measure. I do so for four reasons.
The first aspect that I welcome is the flexibility in hours that the measure provides. That is important and it is about time that it came in. The second aspect — a minor measure—relates to the funds available for infrastructure. Thirdly, I particularly welcome the measure for the deal that has been arrived at on weights. That deal, for which my right hon. Friend the Secretary of State fought and which he won, allows for the reduction of axle weights and additionally will continue to keep noise levels of vehicles down. It should reassure both urban and rural dwellers.
Above all, I welcome the measure for the increase in permits. It is ridiculous that British haulage has been put at a severe disadvantage, vis-a-vis French, German or Dutch hauliers, because of the few permits that are issued to British hauliers. I am delighted that permits are to be increased by 30 per cent. in the first year and 15 per cent. thereafter, to an increase over four years of 100 per cent. I should like to see the complete scrapping of the restrictions on permit numbers.
Finally, I urge my right hon. Friend to continue to ensure that companies and lorry drivers who offend, particularly those who persistently offend, against the weight regulations, are given stringent fines. The vehicles and drivers should be arrested until those fines are paid. In order to assist him, I should like to see the more widespread introduction of small portable electronic weighbridges which the police can carry around in trucks to check lorries which they think are overloaded.
This is a modest but excellent measure and I hope that the House adopts it.

Mr. Eldon Griffiths: With respect to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), for whom I have a good deal of affection, I have never heard her, or any other Front Bench spokesman on transport, make a speech that went so wide of the subject matter of the debate. I had a feeling as I was listening to her that she had either picked up a crib that had been prepared for the debate four years ago when we stopped the 40-tonne limit, or that she had an anticipatory brief that had been prepared for the debate that may take place 18 months from now. Whatever the provenance of her brief, it was not related to the derogations that my right hon. Friend the Secretary of State has brought back from Brussels.
My right hon. Friend has done rather well. I did not expect that he would succeed in persuading the Community partners that there should be an indefinite ceiling on weights, an indefinite limit to lengths, that he would also, while achieving those two surprising results, bring back a little extra in quotas, and permits, and that he would get a little bit on the side for the M25, and a little bit more for the electrification of the railways in Essex. Taking the package as a whole, the House should

congratulate my right hon. Friend, and not, with respect to the hon. Lady, try to fabricate some sort of attack out of thin air.
I want to make three quick points. The first is that occasionally somebody in the House should say a good word for the heavy lorry. I have a rural constituency. I am just as much concerned about the impact of heavy lorries on villages and towns as anybody else. But it is a beast of burden. It is not the lorry that is the problem, but the fact that it gets mixed up with people, because we have not as yet been able to build enough bypasses and new motorways and we have not succeeded in making lorries sufficiently clean, safe and quiet in their operation.
I hope that my right hon. Friend will find some opportunity to tell the House—not in any detail—of the progress that is being made on the quiet heavy lorry, on the new safety arrangements, particularly against jack-knifing in the case of articulated vehicles, and also the progress that is now capable of being made in providing for more efficient and smaller weighing apparatus. Perhaps we could hear more about the technical progress being made in improving the lorries themselves.
Secondly, my right hon. Friend spoke of the additional permits that he had wrung out of our European partners, but is he confident that the French Government, in particular, will honour them? Sometimes permits are available in theory on a Community-wide basis but in practice are not forthcoming from France.
Thirdly, and more generally, I believe that no Community country has more to gain than we have from a common market in services. If we can move fairly swiftly towards a common market in transport, we shall gain almost five times the potential market on the continent that any European country' will gain here. That is the relative size of the market available, so it must be right for us to venture down that road.
Personally, I feel almost a sense of shame that British Transport Ministers constantly have to go to Brussels, as I did a long time ago, to make these appeals because we have a road and bridge system that is not up to the traffic that we seek to place on it. In the long run, the answer is not to stay away from the Common Market in transport or to object to harmonisation of lengths, widths and axle weights but to improve our infrastructure so that we can enjoy the benefits of a true common market in heavy vehicles.

Mr. Roger Moate: The speech of my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) contained exactly the same contradiction as that of my right hon. Friend the Secretary of State. At the end of his speech my hon. Friend proclaimed his belief in a true free common market in services and transport, and I agree with that. Earlier in his speech, however, he sought to defend a differential between the United Kingdom and the Community in terms of lorry weights. One cannot have both.
The overwhelming argument for free movement of lorries and a true common market in services emphasises the fact that the derogation secured by my right hon. Friend is temporary in nature and, when it comes to the crunch, will not protect us aginst 40-tonne lorries. That fundamental contradiction in the case put by my right hon.
Friend the Secretary of State is the reason why the House should view with great suspicion and indeed reject the proposition before us today.
Only two years ago, after immense debate, the House concluded in favour of a 38-tonne limit—not a two-year stay of execution. I appreciate that it is a matter of conjecture, but I believe that there is a danger that we are now being asked in effect to agree to a stay of execution for two years. We did not vote for such a derogation two years ago. We voted for a 38-tonne limit. At that time there was no Community agreement on 40-tonne or 44-tonne vehicles. The proposition was that we should fight for a Community compromise in our direction, but that is not what my right hon. Friend the Secretary of State has now secured.
My right hon. Friend the Secretary of State has conceded the case for a European 40-tonne lorry and secured a two-year derogation for this country. He claims also to have gained the victory of a power of veto after that, but it was always our view that we had such a power on matters of fundamental national importance. We were assured time and again that that was the position, so what extra gain has been achieved?
As the hon. Member for Newham South, (Mr. Spearing), who chairs the Select Committee on European Legislation, pointed out, we should consider the matter in its context. We are told that what the Government have achieved is part of a good package, and that that is why it has taken them so long to bring it before the House. We are told that we should, therefore, accept it. I suspect that in two years we shall be told the same thing.
We are agreeing, together with Eire, to be the odd man out in Europe. That position is not one that can be sustained for any time. My right hon. Friend knows that. I suspect that he does not even want to keep out the 40-tonne lorries. He emphasised that he accepted the fact that there had been a decision by Parliament two years ago. However, the weight of his argument seemed to be in favour of the economic case for the 40-tonne lorry — and, of course, there is an argument for the 40-tonne lorry.
The terms of the derogation are essentially temporary. Effectively, it will last until we have improved our road network. Intellectually and in logic, we are conceding the case. We have secured only a two-year derogation. That is not what we argued for two years ago, and we should not accept it tonight.
The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said that it was reprehensible that the arrangement should have been brought before the House in such a hurry. I agree with her. She also argued that the decision would result in further damage to the environment. I agree with her on that, too. I will call the hon. Lady's bluff. If she will vote against the motion, I will join her in the Lobby.

Mrs. Dunwoody: I should be very happy to join the hon. Member for Faversham (Mr. Moate) in the Lobby. As always, we may be a distinguished few, but what we lack in numbers we shall make up for in quality.

Mr. Moate: I am delighted that the hon. Lady takes that view. I feel strongly that we are being asked to make an unfair decision, given the time factor that is involved. In the next couple of years the pressures on us from the Road Haulage Association, the Freight Transport

Association and many other bodies will increase. The pressure not to exercise the veto will be immense. In two years Parliament will be presented with a package that we are told is too good to refuse.
It was unfair of the Government to present us with this package tonight. I understand that the Select Committee considered the question on 12 December, about a week ago. Presumably —I judge from the documents—the Committee did not know of the deal that my right hon. Friend did in Europe on that day or the day before. Hardly a week later, we are presented with this package, without much background information, an explanatory memorandum or much newspaper coverage. If we assent to the motion, the agreement will come into effect tomorrow.
After only a few days, we are being asked to accept the proposition of a Community regulation for 40-tonne lorries and 11-tonne axle weights, with the simple defence that in a couple of years we will have the right to a veto.
I am not opposed to heavy lorries. I recognise the importance of an efficient transport industry. I believed, however, that we had settled on the weight of 38 tonnes. We have now conceded that before long we will take a further step to 40-tonnes. Before long, there will be a return to the Armitage report and the European proposition of a 44-tonne limit.
There will be inexorable pressures from the lorry lobby and the Department of Transport, and, as sure as we are here tonight, we shall soon have a 40-tonne proposition.
If there is an opportunity to vote tonight, I shall be delighted to vote against the motion. There are not many hon. Members in the Chamber—this is an unlikely night for rebellion—but in a few years I am sure that people will look back to see who was wise enough to vote against what is not the thin end but the thick end of the wedge.

Mr. Ridley: With the leave of the House. The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) was a little grudging in her understanding of this rather minor package. She was suspicious to a degree about the motives behind what I admit is a rather rushed procedure. In no sense does the matter arise because the European Parliament is taking the Council to the European Court. That has nothing to do with it. So finally it became possible to get this package last week. I hardly think that it will affect anything that the European Court might wish to say. I should like to make it clear that we asked the House to consider the directive tonight because we put a parliamentary reserve on the agreement. The agreement was not altogether expected but we got it and, having held up our colleagues in Europe through the parliamentary reserve, it seemed right that I should ask the House if it was content with the directive. There is, in the language of the hon. Member for Newham, South (Mr. Spearing), a package. It is a good package because it includes the increase in quotas, which several of my hon. Friends have recognised as valuable to us and the money for the infrastructure, which is a net gain. It is unusual for us to have that from the Community. As I intend to show, fears about weights and dimensions are quite groundless.

Mrs. Dunwoody: Is the Secretary of State prepared to tell us whether, if the European Court ordered that the directive become law because it believed that none of the existing derogations was acceptable under the treaty,


Britain would have to comply with that law? Is it not possible that that decision could have been taken on 5 January?

Mr. Ridley: The answer is no. The European Court cannot order the Council of Ministers to do anything.

Mrs. Dunwoody: Will the Secretary of State give way?

Mr. Ridley: I have answered the hon. Lady's question.

Mrs. Dunwoody: No, the right hon. Gentleman has not. With the greatest respect, does the Secretary of State accept that the European Court has the right, when it believes that the treaty is not being complied with, to make a decision that overrides British law? Will the Secretary of State be honest about it and accept that we might be ordered to comply?

Mr. Ridley: I have said it once and I say again, that the answer is, no. The hon. Lady is in a dull and gloomy mood tonight. I do not know what is eating her. Perhaps I can cheer her up by saying that there was a possibility, before this directive, that the Council of Ministers might have got so fed up with our refusal to move on lorry weights that it could have made a majority decision to impose a 40—tonne limit on Britain. I assure the hon. Lady and my hon. Friend the Member for Faversham (Mr. Moate), who is also suspicious—

Mr. Moate: Quite rightly.

Mr. Ridley: I do not know what is eating him. We have an extraordinary alliance between my hon. Friend the Member for Faversham and the hon. Lady. They are to have a secret rendezvous alone in the No Lobby. There is no need for that. They can go to much more congenial and convenient places than the rather gloomy and dank No Lobby. I do not advise that. I am happy to tell them that the agreement makes it virtually impossible at any stage for the Council to impose a majority decision on us in regard to lorry weights.
I know that the hon. Member for Newham, South and my hon. Friend the Member for Faversham wanted assurances. For two and a bit years, until February 1987, there is no pressure on us. The Commission will review the state of our roads and report by February 1987. It will then be up to the Council to decide whether to set a target date for deciding whether our roads are adequate. We shall have the right, by unanimous decision, to decide to accept it, or not. There is no question of waiting two years and then it will all start. The power of veto will remain with us for all time, if we wish it to do so. The hon. Member for Newham, South asked about the meaning of article 75(3) and the words "expected to". I admit that it is a clumsy procedure, but no other article can be legally applied in the circumstances of this directive. To ensure unanimous voting, article 100 was not appropriate, and we therefore had to use article 75(3). If the hon. Gentleman sees exactly what that article says, he will see that we have obtained exactly what we want—the right to unanimous votes at that time. If the hon. Gentleman had been with me in Brussels, he would have realised how long and hard it was necessary to fight to include that sentence in the directive and he would not now question it.
I shall not discuss the GLC lorry ban, because it has no connection with this directive. I have heard my hon. Friends' comments about that matter.
I should like to consider our progress with civilising the lorry. My hon. Friend the Member for Warwick and Leamington (Sir D. Smith) asked about bypasses. We have given high priority to opening bypasses, opening 48 in the past five years with more under construction. Extending the motorway network and building bypasses are some of the main objectives for the remainder of this Parliament. By the middle of the 1990s we hope to build more than 140 bypasses. We have encouraged local authorities to build bypasses and to make sensible use of their powers to ban lorries. During the past four years, about 90 local bypasses have been started with financial assistance from the Government. A 1982 survey showed that 2,200 local lorry bans have been introduced in England and Wales. As more towns and villages are bypassed, there will be more scope for those lorry bans.
The hon. Members for Crewe and Nantwich and for Isle of Wight (Mr. Ross) and my hon. Friends the Members for Warwick and Leamington and for Bristol, East (Mr. Sayeed) asked what the Department is doing about overloading. The number of lorries that were weight checked by the Department's traffic examiners last year was 60 per cent. higher than two years earlier. That is a large increase. It has been made possible by installing 50 dynamic weighbridges, and we plan to install another 30 as soon as we can. That is a massive increase in equipment.
The other day, I visited one of the massive weighbridges and saw the major operation on the M1, taking selected lorries and checking them, not only for weight but defects of all sorts. After talking to many of those lorry drivers, I am certain that they know perfectly well that it is risky to drive overweight vehicles and that they are likely to be caught if they do. I hope that I can assure hon. Members that we are doing a great deal.
My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) asked about the M25. I am certain that, when completed, it will take a great many lorries away from his area and London. We shall certainly do all we can to think of ways of attracting, persuading and encouraging lorry drivers to take to the M25 and leave the other roads. There is great scope for local authorities to introduce local lorry bans. I hope that, when the M25 is completed, every local authority will use that route to find opportunities for more local bans or restrictions to persuade lorries to use the M25.
Lorry bans and how best to get lorries out of places where they should not be is better done locally by the boroughs and district councils. That will be helped when the GLC has been abolished because those powers will then devolve to the boroughs. That is another good reason for abolishing the GLC.
The hon. Member for Newham, South asked why the draft directive was not numbered and why there was no explanatory memorandum. The draft directive is not numbered because it is different to the one that was before us at the beginning of the meeting. I make no apology for changing it drastically. I am sure that the House would sooner have the one that I changed which, by the time it reached here, was still not numbered, rather than the numbered one which was not finally adopted by the Council.
Shortage of time made the explanatory memorandum so late that it would have been of little value to hon. Members. I shall make a note to try to ensure that we have one on future occasions.

Mr. Spearing: I was in no way criticising the lack of a number. If the Secretary of State reads my speech in Hansard, he will find that I went out of my way to thank him and any other authorities for supplying the document at short notice. He will have noticed that the report of the Select Committee is dated 12 September. An explanatory memorandum might have enabled some of the disagreements in the debate to have been ironed out. I believe that an explanatory memorandum could have been laid Friday or yesterday without too much difficulty.

Mr. Ridley: I accept that point. I know that the hon. Gentleman does a good job for the House scrutinising all these documents and we shall try not to transgress in future.
I was grateful to my hon. Friends the Members for Bristol, East and for Bury St. Edmunds (Mr. Griffiths) for what they said. I have dealt with some of the points that they made. I do not expect that my hon. Friend the Member for Bury St. Edmunds will press me to answer his question as to whether France will comply with the lorry quota weights. We shall try to make it do so. He was wise to point to the advantages of a common market in transport, if only because we joined a common market which we thought would be a common market in services as well as goods. It is in our national interest that we should have access to trade in Europe as it has access to our markets with its goods. We shall continue to press for that.
For the benefit of my hon. Friend the Member for Faversham, I say that I do not accept that we cannot have a liberalised system of road haulage in Europe without Complete harmonisation first. We have a completely liberal quota-free arrangement between the United Kingdom, Ireland and the Benelux countries with no permits for the circulation of lorries, without having harmonised anything. That works well. It is to our mutual advantage.
I have never accepted that it is necessary to have full harmonisation to have a liberal system of road haulage in Europe. I believe that this agreement, modest though it is, has taken us some way towards a more liberal system in Europe without us having to concede on the harmonisation aspects one iota, which is something that I know that the House would not like. That is why our position has been protected.

Question put:—

The House divided: Ayes 100, Noes 32.

Division No. 57]
[11.18 pm


AYES


Alison, Rt Hon Michael
Chalker, Mrs Lynda


Amess, David
Clark, Sir W. (Croydon S)


Ancram, Michael
Cope, John


Atkinson, David (B'm'th E)
Douglas-Hamilton, Lord J.


Beaumont-Dark, Anthony
Dover, Den


Beith, A. J.
Durant, Tony


Bellingham, Henry
Fenner, Mrs Peggy


Boscawen, Hon Robert
Forth, Eric


Brown, M. (Brigg &amp; Cl'thpes)
Fox, Marcus


Bruce, Malcolm
Fraser, Peter (Angus East)


Cash, William
Gale, Roger





Garel-Jones, Tristan
Norris, Steven


Goodhart, Sir Philip
Osborn, Sir John


Griffiths, E. (B'y St Edm'ds)
Page, Sir John (Harrow W)


Griffiths, Peter (Portsm'th N)
Page, Richard (Herts SW)


Hamilton, Hon A. (Epsom)
Patten, John (Oxford)


Hanley, Jeremy
Percival, Rt Hon Sir Ian


Harris, David
Portillo, Michael


Hawkins, C. (High Peak)
Ridley, Rt Hon Nicholas


Hawksley, Warren
Roberts, Wyn (Conwy)


Heddle, John
Roe, Mrs Marion


Henderson, Barry
Ross, Stephen (Isle of Wight)


Hickmet, Richard
Sackville, Hon Thomas


Holt, Richard
Sayeed, Jonathan


Hooson, Tom
Skeet, T. H. H.


Howarth, Alan (Stratf'd-on-A)
Smith, Sir Dudley (Warwick)


Jones, Gwilym (Cardiff N)
Spencer, Derek


Jopling, Rt Hon Michael
Stern, Michael


King, Roger (B'ham N'field)
Stradling Thomas, J.


Kirkwood, Archy
Taylor, John (Solihull)


Knight, Gregory (Derby N)
Taylor, Teddy (S'end E)


Lang, Ian
Thompson, Donald (Calder V)


Leigh, Edward (Gainsbor'gh)
Thorne, Neil (Ilford S)


Lennox-Boyd, Hon Mark
Thurnham, Peter


Lester, Jim
Townend, John (Bridlington)


Lightbown, David
Tracey, Richard


Lilley, Peter
Waddington, David


Lloyd, Peter, (Fareham)
Waller, Gary


Lord, Michael
Wardle, C. (Bexhill)


Lyell, Nicholas
Warren, Kenneth


MacGregor, John
Watson, John


Major, John
Watts, John


Marshall, Michael (Arundel)
Whitfield, John


Mather, Carol
Whitney, Raymond


Maude, Hon Francis
Wilkinson, John


Maxwell-Hyslop, Robin
Wood, Timothy


Miller, Hal (B'grove)
Yeo, Tim


Mills, Iain (Meriden)
Young, Sir George (Acton)


Mitchell, David (NW Hants)



Moynihan, Hon C.
Tellers for the Ayes:


Neale, Gerrard
Mr. Michael Neubert and


Nicholls, Patrick
Mr. Tim Sainsbury.


NOES


Barron, Kevin
Loyden, Edward


Brown, Gordon (D'f'mline E)
McDonald, Dr Oonagh


Cocks, Rt Hon M. (Bristol S.)
Miller, Dr M. S. (E Kilbride)


Corbett, Robin
Moate, Roger


Cunliffe, Lawrence
Morris, Rt Hon A. (W'shawe)


Dalyell, Tam
Parry, Robert


Davies, Ronald (Caerphilly)
Patchett, Terry


Davis, Terry (B'ham, H'ge H'l)
Pike, Peter


Dunwoody, Hon Mrs G.
Powell, Raymond (Ogmore)


Eadie, Alex
Prescott, John


Evans, John (St. Helens N)
Rowlands, Ted


Godman, Dr Norman
Snape, Peter


Hogg, N. (C'nauld &amp; Kilsyth)
Spearing, Nigel


Hoyle, Douglas
Warden, Gareth (Gower)


Hughes, Sean (Knowsley S)



Janner, Hon Greville
Tellers for the Noes:


Lambie, David
Mr. Don Dixon and


Lloyd, Tony (Stretford)
Mr. John McWilliam.

Question accordingly agreed to.

Resolved.
That this House takes note of European Community Documents Nos. 4088/79, 9292/81 and 9508/84 and the unnumbered Draft Directive submitted by the Department of Transport on 13th December 1984; and notes with satisfaction the position adopted in relation to the Draft Council Directive on the weights, dimensions and certain other technical characteristics of certain road vehicles.

PETITION

Human Embryos

Sir Dudley Smith: I beg to ask leave to present a petition from the Leamington life group. It contains 2,000 signatures of residents of Warwick and Leamington district. The petition calls for legislation that will forbid all practices that offend against the dignity and right to life of human embryos produced in vitro, such as buying and selling them, discarding them and using them as sources of tissue for transplant or subjects for research or experiment, unless this is done solely for the benefit of the human beings concerned. The petition has been occasioned by the Government's request for public response to the recommendations of the Warnock committee, whose report was published in July. It has my full support. I shall not weary the House with a full reading of what the petition says, but, like a number of similar petitions presented by hon. Members, it says:
Wherefore your petitioners pray that the House of Commons will take immediate steps to enact legislation and ends:
And your petitioners, as in duty bound, will ever pray etc.

To lie upon the Table.

County Hospital, Lea Valley

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sainsbury.]

Mrs. Marion Roe: I am grateful for the opportunity to put the case for a new county hospital in the Lea Valley area of Hertfordshire. I shall preface my argument by saying that in my constituency there are no hospital beds for a population of 86,954 in 1981, projected to rise to about 91,000 in 1991. Health care provision for the area is distorted by this simple fact, and it makes proper care for the region that much more difficult by artificially creating stress on the facilities that provide health care for my constituents.
In October 1961, the Cheshunt urban district council produced a report concluding that hospital facilities for the area were inadequate. Although at the time this was thought to be a low priority, by January 1971, the northeast metropolitan regional hospital board had incorporated a hospital for the Lea Valley in its proposals for the future, but reorganisation never saw this proposal become reality.
The reasons that persuaded Cheshunt council over 20 years ago have become even more compelling now. Changes to the local population, both in terms of vastly increased numbers and of age, place greater pressure on existing facilities, and changes to policy have left east Hertfordshire at a severe disadvantage. At a time when, quite rightly, the Government are pursuing a policy to encourage the maximum health care to be provided at district level, circumstances prevent east Hertfordshire district health authority from being able to achieve that.
Part of the problem is of a purely organisational character. East Hertfordshire area health authority provides acute facilities at Queen Elizabeth II hospital in Welwyn Garden City and Hertford county hospital. The eastern part of the health authority area has no real connection with Welwyn Garden City, whether in terms of education, entertainment, employment, or social services. It relies upon Hertford county hospital as a focus for health provision.
Hertford county hospital opened 150 years ago and with a facade listed as being of architectural or historic interest, is on a small site, which has far-reaching consequences. It means that the hospital cannot provide the full range of services and that it cannot be expanded to do so.
Hertford county hospital has no maternity, children's, geriatric or mental illness beds and no ear, nose and throat or ophthalmology in-patient beds: It cannot become a natural focus for acute services locally. GPs and the public choose to use other hospitals outside the district. As time goes on, the hospital's viability must come into doubt.
The future of Hertford county hospital is central to the provision of health care in the area. The East Herts health authority is firm in its belief that the redevelopment of the hospital would be expensive, restricted and a waste of precious resources.
Although such a development might benefit the residents of Hertford, and to some extent of Ware, it would achieve little for my constituents, who already look elsewhere for provision outside the district.
To allow the county hospital to run down without making provision for a new facility would cause the local population to look to Welwyn Garden, Harlow, Enfield and other hospitals outside the district, which would be


forced to develop their services to meet the increased workload. Such a move would undermine the possibility of services being managed and provided on a local basis which was, after all, the purpose of recent changes in the structure of the Health Service.
Statistics underline the problem and the need for action. The district provides acute services for only 45 per cent. of its population. That is an insufficient level around which to locate long-stay and day place provisions for priority services. As a result only two thirds of geriatric patients and one third of psycho-geriatric and mentally ill patients can be treated in the district.
About 25 per cent. of ambulance journeys beginning in the district are to hospitals outside Hertfordshire. That has implications, not only for immediate costs but for the way in which resources are stretched and it limits the capacity of the service.
The treatment of patients outside the district also creates problems for families, GPs and outpatients, who are often faced with long journeys without public transport. Examples of public transport difficulties are numerous. From Hoddesdon it takes 40 minutes to get to Queen Elizabeth II hospital at Welwyn Garden city and there are only four direct buses each day. It takes 26 minutes to get to Hertford with only five buses a day. No direct bus service links Cheshunt to Chase Farm hospital, Enfield. The minimum journey time is 40 minutes. Constituents sometimes spend an hour, or an hour and a half, at a return cost of £2·50.
Public transport is needed most by old people and young mothers—the two groups most likely to need health care facilities. Time and expense cause concern. I do not criticise the quality of health care, but such a situation creates an atmosphere which is the reverse of that which the Government seek to achieve — health care close to local needs.
Other complications arise from the confusion about catchment areas in Hertfordshire. There are defined catchment areas for some services such as mental illness, but they do not exist for other services. Where they do exist, they do not necessarily coincide. I shall give an example. An elderly patient in my constituency would receive hospital treatment in Welwyn Garden city for a geriatric complaint, but in Harlow for a psycho-geriatric complaint. However, if he lived in Cheshunt, which is in the constituency, he would not take either course for he would go to St. Michael's, Enfield, or Highlands, Winchmore hill, respectively. Put next to this, the laws on Sunday trading appear simple. The people of areas served by both the East Hertfordshire district council and the Broxbourne borough council depend quite heavily upon health authorities other than their own.
In Broxbourne, 63 per cent. of the population receive hospital services supplied by the Enfield health authority. In east Hertfordshire, 35 per cent. are served by the West Essex health authority. Any changes in health care policy by these authorities will affect those within the East Hertfordshire district health authority. For example, a move away from in-hospital treatment towards community-based care would have a considerable effect upon the follow-up services which are provided by the immediate district health authority, which in this instance is East Hertfordshire. Such a change in policy would have substantial financial implications for it, yet it has no

representation on the neighbouring health authority. That is because the East Hertfordshire district health authority is in the north-west Thames regional health authority whereas Enfield and the West Essex district health authorities are in the north-east Thames regional health authority area.
According to current regional norms, there is a major shortfall of beds in the East Hertfordshire district health authority. The most serious part of this is in the provision for local acute services and psycho-geriatric and geriatric services. This shortfall will become more severe in the next 20 years. In 1981, 12·2 per cent. of the population of Broxbourne borough were over 65 years of age. It is estimated that by the year 2000 this will have risen to 15·6 per cent., while the population as a whole will increase as people leave inner London. It is estimated that it will rise by about 10,000. The future expansion of both Hertford and Harlow and the effects of the new M25 will also have to be taken into account.
The overall picture is clear. Health services in east Hertfordshire, and consequently in the neighbouring health authorities, will be placed under greater strain. If there is a shortfall of hospital services now, there will be an even greater one in the near future. Recent closures have not improved the position.
Over past years, the closure of four hospitals in the area and various reductions in the numbers of beds have been offset only partially by expansion of the Queen Elizabeth II hospital in Welwyn Garden City. The net loss has been slightly fewer than 150 beds, which has put extra strain on facilities such as the Hertfordshire county hospital, which are not sufficiently equipped to cope alone.
Decisions need to be made soon. The north-east Thames regional health authority must make provision for Hertfordshire patients and for the increased pressure that these will cause to resources. Obviously it will have to make decisions on capital developments, which will have implications of a permanent nature and could result in there never being proper local services in east Hertfordshire.
The position is one of considerable concern locally. A week ago I presented to the north-west Thames regional health authority a petition containing nearly 11,000 signatures collected in the borough of Broxbourne calling for a new county hospital. A similar petition organised in Hertford town, containing about 4,000 signatures, has also been presented. Other petitions from the area will be presented shortly. Support for the proposal has been given by many local bodies, including the east Hertfordshire district council, Broxbourne borough council, Hertford town council, Ware town council, East Herts district health authority and the community health council, and various parish councils. Those representing professional groups have also responded favourably. These include the Hoddesdon voluntary services council, which represents voluntary caring organisations in the district, and the Hertfordshire local medical committee, which represents local National Health Service general practitioners. Both organisations have written to me in support of the idea.
For over 20 years this proposal has been under discussion. Locally it is agreed that the best plan for the future is a new county hospital to provide for the people of the Lea Valley. It is, of course, suggested in the north-west Thames regional health authority plan for the acute services. But for so long that is all that it has been—a suggestion. Present arrangements for the Health Service in


the area and the funding that derives from them mitigate against local decisions being made locally. As people move from inner London to areas in the home counties such as my constituency, such problems will be magnified especially if there is not a corresponding reallocation of funds.
One careful look at the future funding of Enfield health authority is enough to confirm that that is not happening, for the planning assumptions for Enfield assume a fall in population. That, combined with the need for efficiency savings, points towards a steady fall in revenue allocation for Enfield, and that is bad news for Broxbourne, which looks to Enfield for services and where the population is increasing. The Resource Allocation Working Party formula bias is weighted towards the number of people attending as inpatients in hospitals. The present lack of hospital facilities in east Hertfordshire means that its funding is distorted. Lack of resources prevents local people from having a proper say in local health care.
The case for a new county hospital for the Lea Valley is overwhelming. The current arrangement not only detracts from local health care but serves to act as an inefficient, wasteful use of resources. The National Health Service is there to serve the community, and that means that it must be capable of responding to the community's wishes. Perhaps the best way to express how a new hospital would help is in the words of the east Hertfordshire health authority's draft operational plan for the next three years, which states:
The problems of the District can be simply stated. The Authority provides in-patient services for only two-thirds of the geriatric population of the district; half of the acute and maternity population of the district; one third of the mentally ill and psychogeriatric patients … Many East Hertfordshire patients have to travel unnecessarily long distances for routine treatment, and ambulance costs are inevitably higher. There are particular problems arising from a situation where the Authority has no direct control over services provided from outside the district, for example, the earlier discharge of patients from a hospital in an adjacent district simply places East Herts community nurses under even greater pressure.
A study is being carried out into the need for a new hospital to serve the Hertford/Ware/Broxbourne area. If it is built, the situation on the eastern side of the district will be transformed. Patients living in Hertford and Broxbourne will no longer be the poor relations, having to look everywhere but their own District for treatment.
However, the timing of the new hospital development is of enormous importance. If this district is to take over responsibility for services for the mentally ill and elderly mentally ill in the east sector by the early 1990s, care for increasing numbers of elderly, provide for more of its acute patients as beds in Inner London, West Essex and Enfield reduce, then the phase of the new development must be operational by or before 1990.
I am sure that my hon. Friend the Minister understands that the lack of local hospital facilities means that my constituency cannot solve its own problems locally. I trust that he will agree that the provision of a new hospital to serve the residents of the Lea Valley is an urgent requirement that should be implemented as part of the north-west Thames regional strategy, which is about to be issued.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Patten): I listened with great care to what my hon. Friend the Member for Broxbourne (Mrs. Roe) said about the provision of health services in her area. I was moved not just by her characteristic clarity in putting her case but by the evident

demonstration of community concern that she showed, especially through the petition of some 11,000 names in support of the hospital that she and many of her constituents wish to be constructed. The figure of 11,000 is formidable — not quite as formidable as my hon. Friend's majority of 17,000 at the general election over her wretched Liberal-SDP opponent, but none the less a formidable number of signatures—and I am sure that that represents accurately the strength of feeling in Lea Valley about the pressing need, in the view of many people in that part of Hertfordshire, for a district hospital to be constructed.
My hon. Friend raised a number of detailed points about provision for various sorts of patients with various sorts of needs, but she will probably agree that central to them all is the strongly held view—locally at least—that the East Hertfordshire health authority is severely under-provided in terms of health care resources. That was the core of my hon. Friend's argument. The only solution seems to be the provision of a new district general hospital to serve the population. Although such hospitals are desirable, my hon. Friend knows that they do not come cheaply, and £20 million, £30 million or £40 million is the sort of expenditure about which we are talking
We must first consider the needs of the residents of the area and of potential patients whom it is the purpose of the NHS to serve. Secondly, we must consider the proper planning of health care resources in the north-west Thames region. I take this opportunity of paying tribute to the recently retired chairman of the north-west Thames regional health authority, Dame Betty Patterson, who served for so long and so well, and who laid down the burden at the end of last month. I wish her successor, Mr. Bill Doughty, the very best of fortune in handling a number of problems which will land on his plate in the coming months, one of which will be the item which my hon. Friend has drawn to my attention.
My hon. Friend was right to say that the north-west Thames regional health authority is currently developing its strategic plan for the 10 years ahead. I shall shortly be meeting the chairman of the health authority, and I shall draw to his attention my hon. Friend's views about the pressing need for the hospital to be built. But this will be a co-ordinated blueprint for the co-ordinated development of health care in the region for the next 10 years, taking full account of the resources which are likely to be available.
We will then have a picture of the demand from residents, patients and potential patients, the planning input which the north-west Thames regional health authority must make, and the finance. It is essential that any development in the east Hertfordshire area must be an integral part of the overall plan, because my hon. Friend will know that there will be many competing demands for the limited resources available to the authority.
In the first instance it is for the north-west Thames regional health authority to decide priorities. I do not think that it is possible for my right hon. Friend the Secretary of State, my right hon. and learned Friend the Minister for Health and myself to take planning decisions about the placing of every hospital in England. That is not within the capabilities of the DHSS, based as it is in London. It is for precisely that reason that the regional health authorities are charged with the planning of provision related to the local environment and local community needs. The regional and district health authorities are best placed to make these


important planning decisions. I know that that view is shared by my hon. Friend the Minister for Social Security, who characteristically has come into the Chamber to listen to the closing stages of this debate.
We shall be discussing the strategy for the north-west Thames region with the chairman at the regional review early next year. This is part of the improved accountability machinery that we have introduced, and it has proved an effective way of discussing such issues with regional chairmen.
We firmly believe that within the parameters laid down at national and regional level the detailed planning of the Health Service is best done locally. However, I should like to reassure my hon. Friend the Member for Broxbourne that this is not to say that my right hon. Friends and myself take no interest in such matters. On the contrary, we have taken great pains to increase accountability at all levels in the National Health Service, from the individual unit or hospital right up through district and region to the NHS management board. We welcome the recent appointment of Mr. Victor Paige as the chairman of that board.
This means that plans are best drawn up by those nearest to the planning problems. I am sure that my hon. Friend would not suggest that it would be desirable for Ministers to take decisions in any part of Hertfordshire without taking into account the needs of the local residents and the demands of the local health service. It is that difficult "trick" which the north-west Thames regional health authority under its new chairman, Mr. Doughty, will have to turn in future months and years. If my experience of the last two or three months is anything to go by, Mr. Doughty will soon learn that on every occasion when my hon. Friend meets him she will stress with persistence the need for this hospital to be built in east Hertfordshire. I give that warning to him tonight, for whenever I see my hon. Friend and she stops me I know that it will be, quite rightly, to press upon me the need for this hospital to be built.
The first stage in carrying forward the idea of a hospital in the Lea Valley which my hon. Friend has pressed upon my right hon. and learned Friend and me must therefore be for the district health authority to put forward a detailed proposal to the regional health authority to meet the need which it believes to exist. A great deal of work is taking place in this context, but I hope that my hon. Friend will recognise that the Lea Valley hospital is at this stage a concept rather than a proposal.
Secondly, nobody has yet worked out how much a hospital such as this would cost, were it to be built in that area. There are estimates of how big it should be and how big it would be and how long it would take to build—although my hon. Friend has suggested the 1990s as the lastest possible date by which she would wish this hospital to be constructed— and precisely where it should be sited. I should be asking the north-west Thames regional health authority to earmark an unspecified sum over an unspecified period to build a hospital for which no plans at present exist if I pressed upon Mr. Doughty and his colleagues the need to build a hospital in the way in which

my hon. Friend has pressed her case tonight. A great deal more planning needs to be done before any decisions can be taken.
The regional and local health authorities have set up a joint working party to look at the issues and, in liaison with the neighbouring north-east Thames regional health authority, to draw up definite proposals. I expect that we shall receive their report in April 1985. Whatever its recommendations, there will be time for them to be inserted into the regional strategy which is due to be published next summer, which will allow my hon. Friend to continue to make the points as powerfully as she has made them already about the need to build this hospital. But the cost will be substantial.
Because of the likely costs of a project the size of a brand new district general hospital, in due course the proposals would have to be laid before my right hon. and learned Friend and me to consider. This is a careful, painstaking and very important process. I hope that my hon. Friend will appreciate that I could not guarantee tonight sums of money for a Lea Valley hospital, should one be built, until there was a firm indication of cost and of siting and of other proposals which are being made at the same time for other parts of the county by others with an interest. I am seeking not to discourage my hon. Friend from the line that she is pursuing but rather to put before her the stages which have to be passed through before decisions are reached. In all that we shall be helped and guided by what she and other interested parties, such as the Broxbourne district council, have to say. I have seen that council's report and I welcome it.
Ministers in my Department are always pleased to see local authorities taking a keen interest in health matters and joining in debate on local issues. It is essential that health and local authorities work together where and when they can to plan services for the populations that they serve. I am sure that the East Hertfordshire health authority will look carefully at the proposals of the Broxbourne district council and consider them when it draws up its plans.
In conclusion, may I summarise the main points that I have sought to make in what I hope my hon. Friend will not think is a deliberately broad-brush reply to her considerable number of detailed points. I cannot yet give detailed replies to her detailed points because we do not have plans in front of us. There is a concept for a new hospital but there is no plan. The local health authority must first work out a genuine proposal for the regional health authority to consider in the light of its strategy. The proposal will then come before Ministers in my Department. I give an undertaking that I shall meet my hon. Friend, if and when that happens, with any delegation of any size within reason that she chooses to bring to discuss the issues.
I am grateful for the points that my hon. Friend has made. I am glad that she has pressed them on myself and my right hon. and learned Friend the Minister for Health tonight. I ask her to continue to press them on the district and regional health authorities within whose area of responsibility the decision on this hospital lies.

Question put and agreed to.

Adjourned accordingly at one minute past Twelve o' clock.